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Business / Technology

Online giants move into the offline world

By WANG ZHUOQIONG (China Daily) Updated: 2015-07-20 07:10

Analysts also believe the online heavy-hitters will find it difficult to expand their payment system because of UnionPay's massive presence in the retail business.

The company is the largest bank card payment processor in China with almost 16 million debit card swipe machines installed across the country. UnionPay processes almost 50 percent of payments in the sector, according to the company's official website.

Last year, more than 47 percent of transactions in the retail sector went through debit or credit cards, totaling more than 12.5 trillion yuan, up 10.9 percent from 2013, according to the People's Bank of China, which oversees UnionPay.

"How fast the mobile payment service can be adapted across China hinges upon whether the value it generates can exceed the costs," Shen at Gartner Inc said.

The costs could be substantial. Putting new scanners in supermarkets and stores across the country, which will allow customers to swipe their smartphones to pay for bills, will not be cheap for the parent companies of Alipay and WeChat.

"This is a great alternative for consumers," Jason Yu, general manager of Kantar Worldpanel China, a retail consultancy company, said. "But the biggest barrier will be the willingness of shoppers to try this new system. Will this be beneficial to them."

At least, Alibaba and Tencent have a couple of aces up their sleeves. Both companies specialize in big data, a broad term for processing large amounts of complicated statistics, which can be boiled down into consumer trends.

Jack Ma, the founder of Alibaba, has invested heavily in financial companies that specialize in this field. He launched Zhejiang Ant Small and Micro Financial Services Group, the holding company of Alipay, which has 270 million regular users.

"The Alipay payment platform will cooperate with Walmart on big data analysis, membership schemes for customers and online-to-offline operations," Ant Financial said in a statement.

This certainly appeals to traditional retailers.

"Through big data research on customer preferences, behavioral habits and credit ratings, Alipay can help us better profile consumers," Walmart said. "This will help us launch more effective marketing promotions and produce lower operational costs."

Wang Xiaoxing, an e-commerce analyst at the Internet consultancy Analysis International in Beijing, was quick to point out that this will work both ways.

"Alibaba already boasts a massive amount of data on online consumption. The opportunity to access data through Alipay to related offline purchases will give it an unparalleled edge in online-to-offline expansion," Wang said.

As for Tencent, the company's key strategy will be to encourage more than 500 million regular WeChat users to shop at selected major retailers. The firm is expected to launch points schemes and membership plans, which give their clients a better deal, when they use the WeChat payment system.

"This can naturally link offline businesses to online deals," Bai Zhenjie, a senior product manager at Tencent, said. "Every payment made online is likely to transfer a consumer into a regular store shopper."

Shen at Gartner shares that view. Since Alipay and WeChat have hundreds of millions of regular customers, they are in right position at the right time to move into traditional retailing.

"By partnering with retail behemoths, Internet companies will be able to expand their online resources into traditional sectors," she said. "This will improve their customer services, which range from online ordering to offline payment."

Ma Si contributed to this story.

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