Tencent Turns to WeChat to Defend China Turf Against Sina...Tencent Holdings Ltd.'s WeChat app is displayed on an Apple Inc. iPhone in this arranged photograph in Tokyo, Japan, on Friday, Dec. 28, 2012. WeChat’s user base could double to 400 million within three years, providing the chance for China’s biggest Internet company to boost revenue by adding mobile e-commerce and location-based advertising, Core Pacific-Yamaichi International (H.K.) Ltd. estimates. Photographer: Tomohiro Ohsumi/Bloomberg
© Bloomberg

WeChat, China’s most popular social media platform, is planning to expand its e-commerce and payment services for brands in Europe with its first operations in the UK.

WeChat, which is owned by Chinese technology giant Tencent, will start to offer its e-commerce platform for British companies to use to sell goods in China. It will then start operating in other markets such as France and Germany. Its only office so far in the region is in Milan.

“We are expanding to the UK next month with a plan to open up direct operations in other European countries next year,” said Andrea Ghizzoni, European director of Tencent.

WeChat wants to work with European brands to sell their products through its Chinese online retail platform. This means that European companies can avoid some of the bureaucracy of setting up their own retail operations in the country.

“Almost 95 per cent of global [luxury] brands are on WeChat now — in the UK, there is Burberry and Mulberry, in Italy, Valentino, Zegna, Prada, all the big brands,” said Mr Ghizzoni. “Two years ago, the number was 50 per cent and last year 75 per cent, so the growth has picked up recently.”

The company also plans to roll out international payment services for domestic customers, which will mean that Chinese tourists would have the option to use WeChat Pay in European stores.

WeChat has more than 800m people using its app daily across the world, although most are based in China.

The scale of WeChat can seem bewildering to the Western internet user given the wide range of internet services on offer, with no directly comparable service of any similar size or popularity in markets such as the UK.

Through its app, WeChat offers users social media and messaging, shopping, music streaming, taxi booking and cinema tickets.

“We manage roughly 1m transactions per minute within the platform. In Shenzhen, driving licenses are distributed directly through WeChat,” said Mr Ghizzoni. “It’s totally different from app or internet company in the western world.”

However, analysts say that Chinese companies often struggle to replicate their business models overseas. Tencent, with its major competitor and retail marketplace giant Alibaba, has been testing international markets for some time with consumer services but without great success. WeChat’s messaging service is one of a number of rivals to more popular services such as WhatsApp.

“There is a tremendous challenge to take [Chinese internet companies] global,” says Scott Likens, who heads PwC’s analytics and emerging technologies business in Hong Kong. “The model that works in China does not work outside China, or at least not as well.”

Members of the public check their mobile phones as they stand on Carnaby Street in London, on March 28, 2017. British Prime Minister Theresa May will send a letter to EU President Donald Tusk with Britain's formal departure notification on Wednesday, opening up a two-year negotiating window before Britain actually leaves the bloc in 2019. / AFP PHOTO / Oli SCARFFOLI SCARFF/AFP/Getty Images
WeChat will start operating in the UK next month, then expand to other European countries in 2018 © AFP

However, WeChat is not looking to replicate its Chinese business in Europe. Instead, its focus will be on bringing international brands to its platform to sell more to the Chinese, alongside services for Chinese travellers abroad.

In Europe, the company has partnered with an Italian start-up called Digital Retex that helps any brand integrate its services on to WeChat’s platform, offering a new digital shopfront.

“Suddenly we had started building all the pieces that were needed to say to a client, you can advertise in China, increase your brand awareness and get customers in a super targeted manner,” Mr Ghizzoni said. “Now, they can talk directly to us, and we manage their campaigns, and do the planning so they can get traction in China.”

WeChat is also focusing on smaller European retailers with no Chinese presence. Typically, foreign companies require a Chinese business license to operate an e-commerce business. Tencent has launched a programme to bypass the license if brands open up only on WeChat.

“This is particularly relevant for small and medium-sized companies with European-made goods, who can suddenly have a direct gate to China without being mediated by distributors and third-party companies,” he said.

Last year, Tencent brought 60 Italian companies, with products ranging from furniture design to food and manufacturing, to WeChat without a Chinese business license. “Now, we are opening up that channel to smaller companies in the UK,” he said.

Tencent is also looking to expand in the US and parts of Southeast Asia. In November, it opened a new office in Singapore, which along with offices in Hong Kong, Malaysia and California’s Bay Area will focus on bringing new advertisers and retailers on board.

“Tencent was early among big messaging services in being able to monetise the service in quite a variety of different ways, it is a role model for Facebook, Snapchat and many others in the west,” said Martin Garner, analyst at CCS Insight. “It’s a carefully thought through, clever move for them to focus on brand partners.”

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