The integration of payments and logistics services on rival platforms marks a departure from the previous model. - Photo: AFP
BEIJING: Consumers will have more payment and delivery options to choose from on major Chinese e-commerce platforms like Taobao, amid a move to promote cross-platform integration.
On Sept 27, WeChat Pay was included as a payment option on Alibaba’s online marketplaces Taobao and Tmall, adding to Alipay, credit and debit cards.
And from mid-October, consumers shopping on Taobao and Tmall will have one more delivery option by JD Logistics, considered to be one of the most reliable in China, besides Alibaba’s own Cainiao distribution service.
In return, JD will introduce Alibaba’s payment service Alipay and Cainiao’s delivery services on its platform.
The integration of payments and logistics services on rival platforms marks a departure from the previous model.
This comes after a regulation for China’s internet industry kicked in on Sept 1, to prevent and stop unfair competition among platforms, maintain market order, encourage innovation and protect the rights of operators and consumers.
Before 2021, the key players in China’s e-commerce sector operated in isolation, building up “walled gardens” that forced users to stay on one platform as companies aggressively guarded their ecosystems.
But a crackdown by Beijing that year on the tech sector saw Alibaba slapped with a record 18 billion yuan (S$3.3 billion) antitrust fine for abusing its dominant market position.
From then, companies started taking small steps to open up their ecosystems, such as Tencent’s WeChat app allowing users to access Alibaba’s Taobao links.
Li Jianggan, chief executive of Singapore-based venture outfit Momentum Works, said Chinese tech companies have reached a point where collaborative competition is the only way forward.
“Most tech companies have saturated their natural growth potential, so lowering the walls gives further growth opportunities to players on both sides,” he added.
For instance, Taobao can now reach elderly consumers in the less-developed regions of China who largely prefer WeChat Pay over Alipay, while WeChat Pay can gain access to Taobao’s larger shopping user base, said Li, who is also a co-author of the book Seeing The Unseen: Behind Chinese Tech Giants Global Venturing.
Alibaba holds the lead in China’s e-commerce market, but its market share has been in decline since 2019 as rivals JD and Pinduoduo started offering lower prices.
In the last two years, ByteDance’s Douyin, the Chinese version of TikTok, has also been fiercely going after a bigger slice of the e-commerce market, further intensifying the competition.
Analysts said the gradual opening up of these “walled gardens” is not solely a top-down initiative, but part of an ongoing trend driven by broader industry dynamics too.
Jacob Cooke, chief executive of WPIC Marketing and Technologies, a Beijing-based e-commerce consultancy, said companies such as Alibaba and ByteDance recognise the benefits of increased interoperability and a user-first approach.
“The opening up of ecosystems allows platforms to expand their customer base and deepen their reach, making this shift a strategic move rather than simply a reaction to government pressure.”
He added: “The emphasis is on gaining user loyalty and boosting overall sales through improved convenience, platform trust and a broader reach. The removal of barriers fits into that strategy.”
The effects of such cross-platform integration may be too early to observe, as some Taobao sellers told The Straits Times they have not received more orders since WeChat Pay was introduced on the platform.
Sha Sha, a vendor on Taobao selling kaftans, said: “I haven’t had more orders. I can’t tell if it’ll bring in more customers yet, maybe after Singles’ Day.”
Another merchant selling dog treats, who declined to be named, said he did not realise that Taobao recently added WeChat Pay as an additional payment option as order volume has remained the same.
Cathy Lai, an analyst at S&P Global Ratings, said having more payment and delivery options adds to convenience for shoppers but their patterns or behaviours are unlikely to change nor will companies see any significant market share changes.
This is as consumers and merchants already switch from one platform to another, so the impact of these changes is not significant, she added.
But collaborative competition does not mean that heated price wars are a thing of the past, said analysts, especially in a time of weak consumer demand when shoppers want more bang for their buck.
Lai said: “Price competition has been the number one emphasis for nearly all the e-commerce players. This will be particularly true in today’s environment.”
Ultra-low pricing will likely still be a big focus during high-volume shopping events like the annual Nov 11 Singles’ Day online bonanza for platforms to boost overall sales and compete for greater market share.
WPIC’s Cooke said he is expecting strong numbers for Singles’ Day, in the light of the recent stimulus measures by the Chinese government, which have sent Chinese stock prices surging, along with strong travel numbers in the ongoing Golden Week holiday, which ends Oct 7.
In 2023, China continued to top the global e-commerce markets, maintaining its position for 11 consecutive years, with 15.42 trillion yuan in sales.
GlobalData, a data analytics and consulting company based in London, said in an August 2023 report that the Chinese e-commerce market is expected to grow at a robust compound annual growth rate of 11.6 per cent between 2023 and 2027, to reach 23.5 trillion yuan in 2027.
Momentum Works’ Li said competition will continue, but players will probably be more cautious about their tactics as well as public perception in the current market when the economy itself needs to recover.
“The message sent is that players should compete on consumer value propositions on a more level playing field, which will benefit the whole tech and consumer ecosystem in general,” he added. - The Straits Times/ANN
