China’s largest tech corporations are rushing to penetrate an industry that’s historically not tech-savvy - brick-and-mortar retail. Dalian Wanda Group, a conglomerate best known for its chain of movie theaters, has launched a US$814 joint ecommerce venture with Baidu and Tencent for the purpose of accelerating the three firms’ reach for in-store mobile payments. Tencent and Baidu have confirmed news of the venture with Tech in Asia.
Wanda will own 70 percent in the company, while Tencent and Baidu will each split the remainder evenly. As a result, it looks as though Wanda will take the steering wheel in terms of strategy and execution, picking the retail outlets and products that will introduce the payments scheme. Consumers who enter a Wanda property – say, a movie theater or a hotel – will soon be able to purchase goods using Tencent’s WeChat Payments (aka Weixin Payments) or TenPay, its predecessor. Tencent and Baidu can also leverage their backgrounds in social and search, respectively, to help with marketing and data management. Wanda intends to roll out the new scheme in no less than 107 of its commercial properties by the end of the year.
Consumers around the world have yet to adopt in-store mobile payments en masse, but the technology looks set to become more commonplace in China, partly due to Alibaba and Tencent nudging the way forth. The latter firm brought in-store mobile payments to a major Beijing department store last February, and also scattered a few hundred novelty WeChat Payment-powered vending machines across the city. Alibaba, meanwhile, has rolled out in-store mobile payments through its Alipay Wallet app in a bevvy of department stores and convenience stores.
While Alibaba and Tencent can easily woo large-scale retailers like Wanda affiliates or national convenience stores, the true hurdle in the online-to-offline payments race lies at the long tail – there are countless small and medium-sized retailers with their own accounting practices and their own preferred payment systems who’ve yet to accept Alipay or WeChat payments. These retailers tend to have very specific needs, tend to be slow to adopt new technologies, and are often too busy worrying about Wednesday’s late delivery to consider trying out a new payment processor.
Tencent and Baidu’s partnership with Wanda indeed marks a boon for Tencent as WeChat Payments expands into more and more retail outlets. Every time a Chinese consumer walks into a Wanda-owned movie theater or theme park, he or she will face an opportunity to make a purchase from within the popular chat app. But more importantly, the high-profile deal serves as a signal to small- and medium-sized merchants that the tide of WeChat Payments is upon them. In some ways, the joint venture resembles Square’s deal with Starbucks, which put the credit card reader in more than 7,000 locations in the US. Inking a deal with a national chain in effect tells smaller merchants, “If it’s good enough for the big guys, it’s good enough for you.”
Alibaba’s Alipay Wallet mobile payment app is already well-entrenched in the lives of Chinese consumers, thanks to its tie-in with Taobao and Tmall, two of China’s most popular ecommerce sites. Beijing-based iResearch estimates that gross merchandise volume through the app hit RMB 905.75 billion (about US$147 billion) for the year 2013 (this figure includes purchases made for goods and services not on Taobao, Tmall, or other Alibaba-owned sites). Tencent’s WeChat payments and Tenpay, meanwhile, saw just RMB 50 billion (over US$8.1 billion).
But that figure could increase thanks to WeChat’s iron grip on mobile messaging within China – the app has 438 million monthly active users, most of whom reside in China, and it’s quickly introducing virtual stores that sit right next to your conversation with your grandma. If winning the race to take over in-store mobile payments comes down to the app that users open the most, WeChat is Tencent’s – and now Wanda’s – biggest asset.
Editing by Malavika Velayanikal
The post Tencent’s and Baidu’s $814M joint venture with Wanda signals the coming tide of in-store WeChat payments appeared first on Tech in Asia.
Tencent’s and Baidu’s $814M joint venture with Wanda signals the coming tide of in-store WeChat payments
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