December 17th 2018
The Chinese online business model, typified by WeChat, is leading to a kind of platform-based hegemony underpinned by ‘total life’ apps. Can this ‘social e-commerce’ model be replicated across the rest of the world? Not sure.
The West – in the wake of recent scandals – seems to have woken up to the potential dangers that may arise if intermediation platforms are able to achieve a monopoly position. In China on the other hand, the WeChat social network continues its amazing rise. WeChat, which claimed to have passed the milestone of a billion users a few months ago, now enjoys a quasi-monopolistic hold over the country’s social network-based business. And what a country it is! China is one of the most connected areas of the planet, with 770 million active Internet users, over 724 million of whom claim to use WeChat every day. And given that, on average, every Chinese citizen spends close to 90 minutes per day on the social networks, WeChat seems to have beautiful days ahead of it, considered considered as the Asian Facebook, it aims at being much more than that and could even lay the foundation of a new-generation, social network-based approach to e-commerce.
A fully-integrated ecosystem
In fact, the ‘platformisation’ of the economy that is now place in China is in many respects quite different from what is happening in Western countries. There are obvious cultural differences and neither the economic paradigms nor the governance models are the same. Nevertheless, they do have in common the goal often stated by the CEOs of the various networks and platforms: to build integrated ecosystems covering the vast majority – not to say the whole – of human interactions, be they social, political or economic.
Yvonne Li, a Brand Consultant at Q1 Consulting, a Chinese consultancy specialising in business intelligence, underlines: “Nowadays, WeChat is no longer only an app but an integral ecosystem providing services for your whole life.” The consequence of this is that WeChat seems to be becoming vital in people’s day-to-day lives. It is as if the app has now become a super-platform with a scarcely-disguised monopoly on all trade and all interactions between people. Ms Li points out that “WeChat works hard to create an ecosystem to bring all required partners together to develop the WeChat world (...) Now you can do everything within WeChat, including shopping, ordering taxis, restaurants, food delivery, city services, payments and so on.” This ‘all-inclusive’ platform certainly has the advantage of simplicity: everything available and accessible in one place, a centralised system around which gravitate a huge number of interconnected applications.
Mini-programmes spearheading an e-commerce revolution
These mini-programmes are nowadays drawing the attention of all Chinese retailers. Indeed close to 600,000 apps are already linked to the super- platform, bringing a total of 170 million users every day. Fully integrated into the WeChat social network, these apps interact with it, not only offering ease of use but increasing the likelihood that the content will go viral. In line with the unified approach of the ‘total platform’, WeChat also integrates financial services such as the WeChat Wallet, which now brings 69% of all revenue on the platform. It provides multiple functionality: ranging from instant online payment to offline payment based on QR codes, plus a consumer credit service.
This business model is not however exclusive to China. We already know Facebook Marketplace and Google Shopping. But this approach is clearly not as popular in the west as it is in China. This is mainly due to the force of habit: people are still firmly attached to bricks-and-mortar stores, and personal data protection is a key concern. After all, in this new social e-commerce world, the watchwords are interdependence and intercommunication, with everything underpinned by user data.
Online platforms accumulating totalitarian powers?
Meanwhile Chinese citizens certainly do not seem troubled by things about make Westerners hesitate – and are perhaps excessively concerned about their own privacy and ensuring full transparency on the use made of their personal data. “In China, people’s concern for data privacy is not quite as strict as among Western people. Apple Pay cannot find its way in Western countries, whereas in China a hundred million people use mobile payment and release their personal data as a matter of course,” explains China expert Yvonne Li. Nevertheless, the potential pitfall of totalitarian control is never far away. By taking on the guise of mini-societies that manage and control interaction between citizens and shaping behaviour by way of their conditions of use, the intermediation platforms are implicitly setting out to become a sort of basic governance mechanism, taking over some of the ‘royal’ prerogatives of sovereign states. We can certainly read this fear into some of the decisions made by the Chinese authorities, leading them to repeatedly curb the activities of the social networks. Similar concerns undoubtedly also explain what prompted various legislative bodies to summon Mark Zuckerberg to take part in a number of official hearings in recent months.
Written in partnership with l'Atelier