How Alibaba & WeChat built their ecosystem with customer experience in mind
Author: Jialin Wu
WeChat’s development focus is on functionality and, specifically, on functionalities that bridge users with other businesses both online and offline. After the success of WeChat Pay, the development team of WeChat went a step further and created Mini Programs, which enabled thousands of businesses to take advantage of WeChat’s user base and its infrastructure. The Mini Programs initiative is a great example of a triple win situation that brings added value to users, other businesses, and WeChat itself. It provides added convenience to users when interacting with thousands of different businesses both online and offline. Thousands of small and large businesses gain access to WeChat’s Mini Programs development platform that allows them to build native applications in WeChat and saves them time and money compared to building their own native apps. Furthermore, building native apps in WeChat also means that the business gets access to users without them ever having to download an actual app again. In this way, WeChat solidifies its status and is further engrained as an essential platform for both users and businesses. Mini Programs basically streamlines all offline to online interactions. For example, an unmanned sleeping pod in Shanghai Pudong airport can be easily used by scanning a QR code: The WeChat app automatically finds and opens the mini app that the QR code is related to, and the only action the user has to take is to press the start session button in the app; then the door of the sleeping pod automatically unlocks, and when the user is finished, he/she simply has to press the finish button. Since the native mini app is integrated in WeChat, which already has the user’s personal details and payment information, the user does not have to input anything anywhere. Once users are done with the service, it’s just out of sight and out of mind, allowing them to easily move and focus on their next task.
Thousands of businesses in Mainland China have their own mini apps on WeChat, and since the focus of Mini Apps is on functionality and efficiency, it is very common for some businesses to have multiple mini apps delivering only a single function. This allows the customer that streamlined one-touch experience, which in an offline setting is what breaks or makes a mini app. People don’t enjoy standing in a physical location and spending time to figure out how an app works; they just want to get what they are there for and move on. WeChat has been able to provide a comprehensive all in one application to users, but streamline all the functionalities in a way that they only show up when they’re really needed. QR codes made it possible for both WeChat and Alibaba to place triggers in physical locations that allow a seamless offline to online transition, serving multiple use cases. The far reaching and ever-expanding use cases that WeChat has successfully made itself relevant in have further grown its network effects. The more users WeChat has, the more businesses will develop Mini Apps; the more Mini Apps exist, the more convenience is created for the users. WeChat has built its network effects on an ever compounding and growing relevance factor, whereby staying relevant means always keeping up with customer behaviours, needs, trends, and goals. WeChat keeps up to date with all these factors in real-time.
Alibaba is another Chinese company that has successfully made itself highly relevant in China. Alibaba’s most successful business area is e-commerce, however, similar to its Western counterpart, Amazon, it has started to venture into the physical world as well. Alibaba has a stake in a slew of companies in China that form its ecosystem, which constitutes Alibaba’s competitive advantage. The ecosystem provides valuable data points that drive relevant new business venture ideas for Alibaba. Take its new grocery concept, Hema, as an example for how Alibaba leverages its ecosystem. The Hema grocery store concept is extremely successful in China to the extent that property prices increase in areas where a store is opened. The location of each Hema grocery store is determined by data from Alipay, which indicates which neighbourhoods have higher spending power, high credit scores, and more families. Taobao and Tmall are able to provide Hema stores with insights on how to better optimise each store’s assortment according to the spending preferences and patterns of those living in the neighbourhood. Since one can order pretty much everything on Taobao and Tmall, they are able to give quite accurate customer preferences when it comes to what are the most popular items people want to buy. Moreover, Alibaba also used its logistics company to turn every Hema store into a distribution center, such that anyone who lives within a 3-kilometer radius from a Hema store can get groceries delivered within 20 min. This increases convenience for customers both in terms of in-store shopping and online shopping from a Hema store. Those who prefer to shop online are guaranteed to get their groceries delivered to their door, and those who shop in-store but have heavier items they do not wish to carry themselves can now get these items delivered to their home. (Chuang, 2019)
Hema supermarket order fulfillment area
Hema supermarket in store robot restaurant
Both Alibaba and Tencent excel at creating ecosystems that effectively bring value and convenience to both customers and other businesses. Their two-pronged approach of building more efficient and relevant connections between customers and businesses also adds value to their ecosystems through network effects. Take Alibaba’s New Retail strategy, which aims to help physical retail stores to become more digital. Part of this strategy is to help independent convenience stores optimise and streamline their operations by giving them the right digital tools. Alibaba provides these stores with assortment analytics that help stores know what items are popular and how much they should stock of each item. In addition, Alibaba provides the stores with up to date POS systems that are well-integrated with Alibaba’s own ordering system. The better the insights and operational efficiency that Alibaba provides to these stores, the more likely these stores will order their stock from Alibaba, which means that more suppliers would partner with Alibaba and more customers would get what they want at more stores. This network effect essentially put Alibaba at the forefront of retail in Mainland China as more and more businesses from different verticals become dependent on Alibaba’s network.
Alibaba sponsored mom and pop shop
