Group Discussion 2 Group 02

Group 2

Michael Chu,
Huang Xiangwei,
Huang Ziyun,
Angel Suen 

Coopetition between Taobao and WeChat Pay

-What is the partnership about?

Distribution & Product

Since June 2023, Taobao (Ali) and WeChat (Tencent) have reached an advertising business cooperation, and WeChat Moments ads have realized direct jumps to Taobao operations. On September 4, 2024, Taobao issued an announcement that in order to improve consumers' shopping experience, Taobao plans to add WeChat payment capabilities, and will gradually open them to all Taobao Tmall platform sellers seven days after this announcement. After the payment capability is officially launched, the payment page of Taobao Tmall merchants that have activated it will display the 'WeChat Payment' option directly, and users can also use WeChat payment directly on the Taobao APP.

-What are the strengths or weakness from both sides. How are they compatible with each other? 

a.       Strength of Tencent (WeChat)：WeChat emphasizes social interaction and has an extensive payment system with over 1.3 billion monthly active users. WeChat Pay is integrated throughout the platform, supporting various payment scenarios; WeChat and WeChat Pay have an absolute market share in counties, towns and other areas, and have an advantage in the sinking market.

b.       Weaknesses：The user base of WeChat cannot be directly converted to its own e-commerce platform, hindering the liquidity of capital, thus necessitating the use of other e-commerce platforms such as PDD, JD etc.

c.        Strength of Taobao (Ali)：Massive base of merchants and consumers, with over 10 million sellers; A one-stop cargo distribution mechanism; It has a large amount of user shopping data and can carry out accurate user portraits and recommendations.

d.       Weaknesses：Lack of social features, limited sharing and jumping channels for product links.

e.       Compatible with each other: WeChat provides Taobao with social attributes, serving as a platform for links sharing, offering consumers a variety of payment options, significantly increasing product exposure; WeChat leverages Taobao's vast shopping platform to enhance the universality of the WeChat Pay system, increasing the liquidity of capital, also increasing the retention of the users.

-What are the new values created?

Enhance the integration and reach of the payment system and products between Tencent and Ali. Using payment methods as the entry point can facilitate the subsequent deepening of links, enhancing mini-program and other functional interoperability within each system, thus forming a unified ecosystem.

-What could be the risk for both/either side(s)?        

Risk for both sides: For WeChat, capital may flow to potential competitors (Alibaba), as Alipay currently holds a transaction market share of around 54%, while WeChat Pay holds around 39%, cooperation could potentially allow Alibaba to further capture market share. For Taobao, Alibaba's existing capital chain and the influence of its payment system will be weakened, thereby promoting the applicability of WeChat Pay to some extent.