Chinese internet giants Alibaba Group Holding and Tencent Holdings are said to be on the verge of a major e-commerce collaboration, which will see bargain online shopping platform Taobao Deals offered as a mini-program on multipurpose super app WeChat.
Under this initiative, Taobao Deals will accept transactions that use online payment service WeChat Pay, which is the main rival of Alibaba affiliate Ant Group’s Alipay. Alibaba, the parent company of the South China Morning Post, has long barred the use of WeChat Pay on its Chinese retail platforms, including Tmall and Taobao Marketplace. Transactions on Tencent’s WeChat have also been exclusive to the platform’s own payment service.
The Taobao Deals team has already started inviting merchants to take part in the bargain platform, according to a report by local media China Science and Technology News on Wednesday, citing anonymous sources.
Alibaba and Tencent did not immediately reply to requests for comment on Wednesday.
The collaboration would appear to be an initial step to help appease regulators’ concerns about monopolistic practices in the country’s internet industry, as both Alibaba and Tencent are embroiled in various antitrust issues. The final version of China’s antitrust guidelines came into effect in February, stipulating how anti-monopoly investigations and disputes in the world’s second-largest economy will move forward.
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China kicks off antitrust probes into Alibaba over alleged monopolistic practices
China kicks off antitrust probes into Alibaba over alleged monopolistic practices
“It’s a positive signal for the antitrust situation in the country,” said Dong Yizhi, a lawyer at Shanghai-based Joint-Win Partners. “This is the first time that Alibaba has cooperated with Tencent on e-commerce and online payment. The barriers have to be broken by regulations, so that China’s internet industry can develop in a healthy manner.”
The State Administration for Market Regulation has been at the forefront of an antitrust crackdown against China’s Big Tech companies. Separately, the People’s Bank of China, the country’s central bank, has published draft regulations on the definition of a monopoly in the third-party payment service market, a move that could affect major players Alipay and WeChat Pay.
With about 1.2 billion users, the enormous reach of WeChat, known as Weixin in mainland China, is what makes it valuable in China’s e-commerce market. The gross merchandise value – a metric of e-commerce sales volume – generated by mini-programs on WeChat doubled in 2020 from 800 billion yuan (US$123 billion) in 2019, according to the social media giant.
“The Taobao mini-program represents the significance of social commerce in online retail, where it is the fastest-growing category,” said Mark Tanner, managing director of market research firm China Skinny. “Deals-type platforms have found particular success on WeChat, so it would be amiss [for Taobao Deals] not to be on there.”
Tencent will have to approve the listing of any new mini-programs on WeChat. It is not known when Taobao Deals will be included in the platform.
Taobao Deals’ potential WeChat entry, however, is not expected to faze budget e-commerce service provider Pinduoduo.
While the WeChat move could make Taobao Deals more competitive against Pinduoduo, which has enjoyed huge success on the ubiquitous social network, joining the platform is not enough to give Taobao an advantage over its rival “as Pinduoduo is already there”, Tanner of China Skinny said. “The advantage [for Taobao Deals] is that it will be found across more touchpoints with the Alibaba and WeChat platforms.”
Still, the Taobao Deals platform has a ways to go before it closes the gap with Pinduoduo. The Shanghai-based company reported on Wednesday that its annual active buyers reached 788.4 million in 2020, up from 585.2 million in 2019. By comparison, annual active consumers on Taobao Deals were more than 100 million last year, according to Alibaba’s fourth-quarter financial report in February. Annual active consumers on Alibaba’s China retail marketplaces, led by Tmall and Taobao, hit 779 million in 2020, which was also behind Pinduoduo’s total for the same period.
Taobao Deals was briefly introduced on WeChat last month, but soon disappeared and replaced with a notice saying the mini-program was suspended, according to local media 36kr.
