WeChat Store is online. It’s time to re-understand WeChat e-commerce

The launch of WeChat Stores marks a key step in the ecological development of WeChat e-commerce, which indicates that WeChat e-commerce will pay more attention to the connection of the entire ecosystem and the decentralized social e-commerce model. Through product-driven rather than operation- or commercial-driven methods, WeChat e-commerce is building a differentiated and imaginative comprehensive e-commerce ecosystem.

After more than half a year of adjustment in WeChat’s e-commerce thinking, it finally has a clearer direction.

The inclusion of video account e-commerce in the WeChat open platform and the upgrade of video account stores to WeChat stores and other actions basically indicate that the status of e-commerce in WeChat has been improved, and the subsequent WeChat e-commerce is a decentralized comprehensive e-commerce ecosystem that connects the entire WeChat domain as much as possible and is based on social thinking. Moreover, this adjustment is promoted through the product-driven approach that WeChat is good at, rather than the operation or commercialization-driven approach. It is WeChat-featured, differentiated and imaginative in the entire e-commerce market.

In our opinion, global ecology, decentralization, and product-driven are the three key points to understanding WeChat e-commerce, and the upgraded WeChat store is a good entry point for understanding.

01 E-commerce based on WeChat global ecosystem

WeChat is a tool, a platform, a lifestyle portal, and naturally an ecosystem. In e-commerce, WeChat has been looking for a product form that can allow more creators to participate and connect the entire WeChat ecosystem as much as possible. The breakthrough point that carries this wish used to be mini programs, video accounts, and now WeChat stores.

On August 25, the video store was upgraded to a WeChat store as scheduled. This upgrade has two key points:

First, the scope of connection of small shops has been expanded. Previously, video account small shops only connected to video accounts, public accounts, mini programs, and Moments. Now WeChat small shops will also appear in more places such as SouYiso. Second, the threshold for merchants to enter has been lowered. As long as they are individual industrial and commercial households, they can directly open WeChat small shops. It even supports trial operation with 0 yuan deposit for merchants who meet certain conditions.

In our opinion, these two key points mainly mean two things:

First, WeChat Stores become the identity ID and pass for merchants in the WeChat ecosystem.

Second, the sense of connection in various fields of WeChat is strengthening.

Regarding the traffic characteristics of WeChat e-commerce ecosystem, there is a vivid metaphor in the industry: doing business on WeChat is equivalent to drilling wells in a large oil field, taking a little from the official account, a little from the mini program, a little from the community, and a little from the video account. The oil field is large, and wells can be connected through tools, but not all wells can be smoothly and fully connected.

Now that the video account store has been upgraded to a WeChat store and has established connections with enough (there should be more in the future) WeChat scenarios, it means that the connection between wells is being strengthened, which will inevitably lead to the enhancement of the ecological liquidity of the entire oil field.

And WeChat Store is that important connector.

In this regard, Jian Feng, founder of service provider Zero One Digital Technology, analyzed that "before the upgrade, video account live broadcast was the first 1, and traffic from public accounts, mini programs and other scenarios was poured into the video account live broadcast room; after the upgrade, WeChat Store is the first 1, connecting the traffic of video accounts, public accounts, mini programs, search and other WeChat scenarios."

Image from Zero One Digital

The so-called video account live broadcast room is the previous 1, that is, all e-commerce transactions in the WeChat ecosystem were completed or amplified as much as possible in the video account field. After that, all transactions can be completed in WeChat stores, and do not have to go through the video account live broadcast room, at least they do not have to stop at the video account live broadcast room.

02 WeChat Stores Activate Global Explosive Power

Why do we say that after WeChat Stores become a connector, the traffic liquidity and global explosive power of the entire WeChat ecosystem will be enhanced? This is related to the existing e-commerce ecological characteristics of WeChat and the product form of WeChat Stores.

Previously, merchants have accumulated a very solid business foundation in mini programs + communities. Tencent previously disclosed at its earnings conference that the transaction volume of mini programs in a single quarter reached 1.5 trillion yuan, mainly including online and offline services in multiple scenarios such as catering and retail, transportation, and people's livelihood payment.

The biggest shortcoming of mini programs is that there is no public domain traffic, which makes it difficult for merchants to break through the existing ceiling. It is also not very friendly to small merchants without development capabilities. The community also has problems with public domain customer acquisition and the standardization and stability of supply sources.

The emergence of video accounts has helped merchants solve some of the concerns in these two aspects, and has seen rapid growth in DAU, GMV and commercialization.

For merchants, they certainly hope that video accounts, mini programs, and communities can be deeply linked to better play the 1+1 greater than 2 effect brought about by the linkage between public and private domains. Many merchants have expressed similar expectations to us, especially some merchants who have previously been deeply involved in mini programs, such as beauty customers and offline retail customers.

The emergence of WeChat stores is expected to further meet the expectations of merchants.

WeChat Store is just a store, a tool. It does not have its own field. It is just the identity ID of merchants and products that can be used in various fields of WeChat, such as video accounts, mini programs, search, and public accounts. It plays a corresponding role according to the ecological characteristics of each field, and establishes connections between fields through the personalized choices of merchants.

Only after the connector returns to its pure tool attributes can it better connect the entire ecosystem and better leverage the richness, long-tail effect and scale effect of the global ecosystem in communication.

For example, combine the public domain amplification capabilities of Video Account/Sogou with the private domain capabilities of Mini Program/Community; combine the instantaneous burst of Video Account live broadcast room with the long-tail dissemination of Sogou/Official Account/Community distribution.

Jianfeng mentioned that 10% of the GMV of some footwear and clothing brands comes from the "Guess You Like" push traffic of small stores. The monthly GMV of a certain leading store is about 100,000, but the distribution of influencers can reach 10 million per month. Some brands have 1/3 of their GMV coming from users' private domain repurchases.

Jianfeng also predicted that WeChat e-commerce will have at least 10-30 times of growth space in the future. This is because the current user experience, duration, and monetization rate of video accounts have at least 10 times of room for improvement (industry insiders predict that the current video account ad loading rate is about 5%, and other platforms are 15-20%). According to the data from LatePost, the GMV of video account e-commerce in 2023 will be 100 billion, which means that video account e-commerce alone can grow to 1 trillion.

Also, in the era of mini programs, after users consume through mini programs, the platform does not retain the consumer's purchase data. Now when users place orders from WeChat stores, the data will be retained on the platform. This will also help the platform make more accurate product recommendations and thus increase its scale.

03 Search and video are accelerators

In the global ecosystem that has established as many interconnected connections as possible, there are two noteworthy new forces that may be accelerators of global connectivity: one is search at the scene level, and the other is short videos at the content carrier level, and the two are related.

Whether from the perspective of WeChat’s intentions or the development of the e-commerce market, SouYisou is another public domain worthy of attention besides Video Account.

For WeChat, video e-commerce has achieved good growth in DAU, duration, GMV, and advertising, but it cannot further leverage the platform's existing creators and consumer groups. If it continues to expand, it will inevitably require in-depth operations or a head effect, which is in tension with WeChat's simple, product-driven philosophy.

From the perspective of the development of the e-commerce market, live streaming e-commerce has encountered challenges in efficiency and experience, and platforms are looking for more abundant e-commerce growth methods that can better leverage their existing advantages, such as using Douyin as a shelf. Even if Tencent does not need to compete head-on with other platforms in the e-commerce market, it must also adjust accordingly based on its own characteristics and needs to form its own relatively stable e-commerce development method.

Souyisou's content distribution forms are more diverse, including pictures, texts, videos, live broadcasts, and even small shops; and its distribution logic is search + recommendation. Previously, "Narrowcast" has analyzed how WeChat activates the traffic on the site through search + personalized recommendation. These two characteristics together lead to Souyisou's distribution being both explosive and long-tailed, and very diverse.

At the same time, Souyisou has a good advertising growth momentum. The financial report mentioned that Tencent's gross profit margin increased in Q2, "thanks to the growth of advertising revenue from Video Account and Souyisou."

As the ecosystem of SouYisou and more WeChat scenarios are connected and functioning, it can be basically inferred that the content form that can better leverage the explosive power of WeChat e-commerce in the future may not be live broadcast, but video.

After all, videos (including live streaming) are suitable for all occasions outside of video accounts, including search, Q&A, public accounts, Moments, and mini-programs. Live streaming can only have greater explosive power in the video account arena.

Jianfeng believes that "if it is a short-term speed, the live broadcast room is efficient, but in the long run, the speed of information flow of short videos is definitely better than that of the live broadcast room." The problem encountered by the live broadcast room is that the information flow ends after the live broadcast ends. Jianfeng also mentioned that currently, when merchants invest in video accounts, they invest more in short videos and increasing fans than in live broadcasts.

However, at present, live streaming still accounts for the majority of video account e-commerce. Previously, the video account live streaming e-commerce team was included in the WeChat open platform, on the same level as official accounts and mini programs, which also shows the importance of video account live streaming e-commerce. Merchants who pursue short-term large GMV will also focus on live streaming. Whether live streaming will account for the majority of WeChat e-commerce in the future "depends on the direction of WeChat's guidance."

04 Products are content, and content is information

The current traffic structure of the WeChat e-commerce ecosystem is basically clear: it is global, WeChat Stores serve as global connectors, and Soso and videos can become accelerators.

But for businesses, they also need to be clear about what kind of content can attract traffic, that is, where the traffic comes from.

WeChat started as a social network, and the most basic traffic is social traffic. Traffic is generated when people exchange information with each other. With the emergence of content products such as official accounts, content traffic has emerged. Good content can also attract traffic through subscription + social + recommendation. Of course, WeChat also has commercial traffic brought by various advertising tools.

So when e-commerce enters the ecosystem as a new role, how will it obtain traffic? This involves WeChat’s product thinking and traffic distribution ideas.

It is said that Zhang Xiaolong once gave this thought on how e-commerce circulates within the WeChat ecosystem: "Commodities are content, and content is information."

In other words, products must be attached to content to gain traffic, and content must be attached to information. And information is the basic element that constitutes WeChat's most basic product capability, "social".

In other words, the most fundamental tool attribute of WeChat is social networking. On the basis of social networking, it has superimposed content creation, e-commerce and other businesses. But no matter what is superimposed, it is necessary to ensure that these new businesses have their own ability to obtain native traffic, and the basis of native traffic is social traffic based on information.

Based on social traffic (and social-based content traffic/product traffic), it is amplified and assisted by various commercial traffic such as WeChat Beans and ADQ.

At the same time, the more content meets and approaches the social needs of users, the better it is likely to be disseminated. Jianfeng drew an inverted triangle diagram for the content dissemination capabilities of the WeChat ecosystem:

The lowest level, which is the most popular and most easily disseminated, is social content, such as "Attention, XX (a certain social relationship), XXX"; it can be spread directly through the social relationship chain; the second is information, hot topic, and local related content, which will be recommended by the platform; and then there are vertical knowledge or aesthetic content, which require subscription to obtain.

Graphics from Zero One Digital Science

The distribution of goods based on social networking also means that WeChat e-commerce is personalized, relatively private, and takes a long time to develop. In other words, it is decentralized.

05 Product and ecosystem driven, not operation and commercialization driven

The reason why WeChat e-commerce is so worthy of attention is that it is sufficiently differentiated and imaginative in the entire e-commerce market.

Its differentiation lies in that it is always driven by products, rather than operations and commercialization. There are several mainstream approaches in the e-commerce market. Alibaba is more driven by industry operations, Douyin is more driven by business efficiency, Pinduoduo is driven by products + mechanisms, and in our opinion, WeChat e-commerce is driven by products + ecology. Its imagination also lies in connecting the entire WeChat ecology as much as possible in a product-driven way.

Through product updates such as video accounts and WeChat stores, the lack of public domain traffic in WeChat e-commerce and the need to further connect traffic and traffic, and between fields and fields can be solved, and the overall potential can be amplified while maintaining the ecological characteristics. In other words, "if a product can solve the problem, it should not be solved by operations, and if an operation can solve the problem, it should not be solved by BD."

A decentralized and open ecosystem driven by products continues to grow by itself through product updates. This is simpler and more convenient than growth driven by operations, and has more possibilities than single-dimensional mechanisms and commercialization. This also ensures that basically no matter what business WeChat does, it does not need to be built completely from 0 to 1, but only needs to be selectively amplified through product updates, and then coordinated through appropriate operations, organization, and strategy.

Of course, the corresponding difficulty is that it is slow and requires a very high level of unity in underlying values.

However, there is no need to worry too much about the problem of insufficient manpower in WeChat e-commerce operations. Pinduoduo has proved that the human sea tactics are not a necessary condition for e-commerce. Pinduoduo is driven by products and mechanisms. 20,000 people drive a huge trading platform with extremely high profit margins, and can quickly turn around when needed.

Commercialization should not be the primary demand of WeChat e-commerce for the time being.

According to the service provider, the current monetization rate of video accounts is only about 5%, while other platforms are mostly 20-30%. Some merchants who came to video accounts with the mentality of seeing results quickly even found that they could not cast traffic. This is because the video account's traffic casting technology is not as perfect and smooth as before. On the other hand, it is also because "WeChat did not want to make money from fast traffic casting at all", an industry insider analyzed.

But its commercialization will grow naturally.

According to the Q2 financial report, Tencent's online advertising revenue increased by 19%, mainly driven by video accounts and long videos. From the industry perspective, it mainly came from increased investment from game, e-commerce, and education customers. With the further connection of the global ecosystem, the advertising revenue brought by e-commerce to video accounts and Souyisou will further increase.

The fierce competition in the e-commerce market continues, but as each company pays more attention to its own advantages, it also gives WeChat e-commerce more room to make adjustments according to its own ideas.

A key step in the ecological development of WeChat e-commerce has been taken. WeChat e-commerce will usher in a new acceleration period, and the market share distribution of the entire e-commerce market may also change as a result.

Author | Pang Mengyuan (Shanghai)
Producer | Shao Lele (Shanghai)
This article is written by the author [Narrow Broadcast] of Operation Party, WeChat public account: [Narrow Broadcast]. It is originally created/authorized to be published on Operation Party. Reproduction without permission is prohibited.

The title image is from Unsplash, based on the CC0 protocol.