Tech

Tencent launches new online shopping feature in WeChat app, in a challenge to rivals Alibaba and JD

Key Points
  • Tencent launched Minishop, a tool that allows merchants to build a virtual store on WeChat. 
  • The move potentially pits Tencent against e-commerce giants JD.com and Alibaba. 
  • It won't be a centralized system like JD.com or Alibaba's Taobao, but it could help Tencent draw away smaller businesses away from these platforms. 
A smart phone with the icons for the social networking apps WeChat and others seen on the screen on June 29 2018 in Hong Kong, Hong Kong.
S3studio | Getty Images News | Getty Images

Tencent has launched tools to help merchants build virtual shops on its wildly popular WeChat messaging service in China, pitting itself against the country's major online shopping giants Alibaba and JD.com.

Businesses and merchants will be allowed to sign up for a test of the e-commerce product, known as WeChat Minishop.

WeChat is China's most popular messaging app with over a billion users. It is a key part of life in the world's second-largest economy.

WeChat is often dubbed a "super-app" because consumers can purchase flights and use payments, all within the app. 

Tencent has had so-called e-commerce "mini-programs" or apps within its WeChat messaging service for a while.

But this new tool will allow a vendor to create an e-commerce mini-program inside WeChat using Tencent's tool instead of relying on expensive developers. It won't be a centralized system like JD.com or Alibaba's Taobao, but it could help Tencent draw away smaller businesses away from these platforms. 

The Chinese internet giant said that merchants won't be charged for opening a virtual store and there will be no service charges either, potentially allowing smaller businesses to create WeChat shops. Alibaba's platforms charge various fees for merchants. 

Tencent also said Minishops will support livestreaming, which has become a popular way for Chinese consumers to shop. This is a feature competitors such as Alibaba-owned Taobao supports too.

The Minishop will also provide merchants with order management services, transaction, logistics and after-sales support. 

Why Minishops might attract merchants

Tencent's advantages lie in its already-massive user base plus its potential access to data, experts told CNBC. 

WeChat Pay is used to pay for items on other websites. The messaging app also has a function called "Moments" which allows users to post pictures, videos and links to websites. These two features could also play a part in helping Tencent target users.

"Tencent broadly sits on quite a bit of both online and offline consumer data," Jacob Cooke, CEO of WPIC, an e-commerce tech and marketing firm that helps foreign brands sell in China, told CNBC.

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What is Tencent?

"For instance, the platform would be able to recommend e-commerce products similar to what they see in offline purchases that consumers make via WeChat Pay."

That data could attract merchants to build Minishops on WeChat. 

"Tencent could also understand what consumers are talking about from all the Moments, etc. This will make 'recommendation' much more useful in two folds:  1/ Richer insights on consumers to make better range selection ... (and) A true personalized recommendation on products to individual consumers in the long run," Pedro Yip, partner and the head of the retail and consumer goods practice for Greater China at Oliver Wyman, told CNBC on email.

Despite its own strong brand, Tencent could face some challenges.

It will need to "have a clear proposition" for the Minishop and "have strong quality control" to ensure an abundance of fake products do not proliferate the platform, according to Yip. 

Correction: This article has been updated to correct the name of WeChat Minishop in two references.