Alibaba merchants hail adoption of Tencent's WeChat Pay on Taobao and Tmall
Alibaba Group Holding's plan to finally accept Tencent Holding's WeChat Pay for purchases on its online marketplaces Taobao and Tmall is expected to help the e-commerce giant attract older consumers, as well as shoppers in lower-tier cities, according to merchants and analysts.
Following Alibaba's announcement to incorporate WeChat Pay, known locally as Weixin Pay, as an additional payment method to its domestic shopping platforms, e-commerce unit Taobao and Tmall Group said the payment option will gradually be made available for all merchants from next Thursday.
Chinese merchants have expressed excitement about the latest partnership between the country's largest online marketplaces and its second-largest mobile payment service. Many hope that the move could expand their consumer base in a highly-competitive market.
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Lauren Huang, who has been running a store on Taobao since 2018, called the deal "one of the biggest good news this year" for merchants. "A large percentage of middle-aged and elderly users prefer using WeChat Pay, so its addition will lure more users here from Pinduoduo," she said, referring to PDD Holdings' rival e-commerce app.
This could be especially important for Alibaba, as it has been ceding market share to PDD, which has gained ground among budget-conscious consumers. Pinduoduo has long incorporated both WeChat Pay and Ant Group's Alipay, which together control 90 per cent of the market in China.
Ant is the fintech affiliate of Alibaba, owner of the South China Morning Post.
Li Yuan, who sells trainers on Taobao, said some of his peers received a notification on the platform on Thursday, inviting them to sign a contract to allow the addition of WeChat Pay.
Although Li said he does not expect a significant increase in transactions because his shop mainly targets younger users in first-tier cities, it is still good to "offer customers more payment options and give them a better experience, especially when all merchants are struggling with low consumer spending".
To navigate a sagging economy and competition from newcomers such ByteDance's Douyin, Alibaba has been trying to improve the experience of both users and merchants on its platforms. In July, it waived annual service fees for Tmall merchants and relaxed its refund policies to reward Taobao sellers with good track records.
Analysts also believe that the inclusion of WeChat Pay would help Taobao and Tmall penetrate low-tier cities, where consumers - especially older users - generally prefer WeChat Pay because it is readily available within the main WeChat app, which many rely on as a messaging tool.
"We think that will help Alibaba attract users that only have or prefer to use WeChat Pay, such as older people who don't know how to open an Alipay account, " said Chelsey Tam, a senior analyst at Morningstar.
Users living in lower-tier cities and those who are older tend to prefer WeChat Pay over Alipay, analysts say. Photo: Shutterstock alt=Users living in lower-tier cities and those who are older tend to prefer WeChat Pay over Alipay, analysts say. Photo: Shutterstock>
It is estimated that there are "several hundreds of millions of WeChat Pay users" who are not Alipay users, most of them living in lower-tier cities, according to a research note from Morgan Stanley on Wednesday.
But while the addition of WeChat Pay could enhance users' experience on Taobao and Tmall by offering more payment flexibility, it could come at the expense of Alipay, analysts said in the note.
Morningstar's Tam agreed there could be "some negative impact" on Alipay, although it is not expected to be huge. "Alipay is also very entrenched in China," she said.
Still, for those who only have a WeChat Pay account, the hope is that Alibaba and Tencent will do more to tear down the walls between their platforms.
Michelle Feng, a resident of eastern Jiangsu province, said she went shopping several weeks ago at Freshippo, the Alibaba-owned supermarket chain, when she saw an old lady trying unsuccessfully to use WeChat Pay, which was not accepted in the store.
"At that moment, I hoped more than ever that people could use WeChat Pay in Freshippo one day," Feng said.
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