China’s Tencent Holdings is using its vast social-media network to attract luxury-fashion brands to its WeChat app, potentially opening a new frontier in online retail. France’s Longchamp and Britain’s Burberry Group have begun selling handbags and clothes on WeChat, China’s most popular messaging app. LVMH Moet Hennessy Louis Vuitton’s Givenchy and Dior brands are testing demand for their goods through flash sales on the platform.
The move signals a challenge to Alibaba, the dominant player in e-commerce in China, where online transactions are expected to reach 6 trillion yuan ($1.18 trillion) this year, according to consulting firm Bain & Co. Alibaba’s sites processed more than $US547 billion ($736bn) in transactions in fiscal 2017, which analysts say is more than eBay and Amazon.com combined.
While luxury sales on WeChat are in their infancy, Tencent’s courting of high-end fashion brands is part of a widening battle between China’s internet companies. Alibaba, Tencent and search engine Baidu are venturing beyond their traditional business lines into payments, social media and e-commerce.
“Customers have responded very well” to Longchamp’s limited handbag sales on WeChat, said Jean Cassegrain, chief executive of the luxury brand, which is considering expanding its product line-up on the app. “One way or the other, (WeChat) will significantly contribute to our sales.”
Upscale brands are rethinking their digital strategies amid a tough environment for luxury sales. Global sales of personal luxury goods were flat in 2016, at €239bn ($359bn), while global spending on luxury by Chinese consumers fell for the first time last year, according to Bain. Even so, luxury brands are seeing a pick-up in mainland China as brands lower prices there and Beijing encourages consumption at home.
In the US, a small number of luxury labels have tested sales on social media including chat apps. But Tencent in China is making inroads with luxury brands by taking advantage of the massive online ecosystem it has built around WeChat, whose more than 900 million users book movie tickets, hail rides, order laundry pick-up and pay for utilities without leaving the app. This year, Tencent also made it easier to launch multimedia advertising and set up shops on WeChat, making its platform more appealing to luxury brands.
WeChat was “increasingly playing an important role in the commercial world,” said Tencent president Martin Lau recently.
The online sales are also fuelling WeChat’s mobile wallet, WeChat Pay, against market leader Alipay, launched by Alibaba’s Ant Financial in 2009. Only WeChat Pay can be used on Tencent’s platform. As recently as 2014, Alipay commanded nearly 80 per cent of China’s mobile payments market, but its share slipped to 54 per cent by the first quarter of this year.