Messaging and e-commerce app WeChat is courting European businesses to advertise and sell to its more than 700 million users in China.
WeChat promises European companies exposure to customers that they can only dream of: the app, which is owned by Chinese technology giant Tencent, is a messaging service that shows advertisements and guides users to companies’ e-commerce stores while saving their shopping preferences as a template for future visits—free from strict European data protection laws. It also hails taxis and has introduced users to a cash-free society with its payment services.
The app company has tried to pick up more users in Europe before, but has now given up on trying to recruit consumers and is instead moving to sign paying companies up for official accounts on WeChat.
Companies based in Europe complain about breaking into the Chinese market because they’re required to pay for business licenses to operate there. For an entry fee that runs into thousands of euros, WeChat’s small European operation sets up companies’ official accounts in the app and offers them Tencent’s cloud storage service, where firms that aren’t registered with a license can duplicate their e-commerce shops behind China’s great firewall so customers can access them faster. On top of that, the app also helps European firms target ads at Chinese consumers who receive messages from companies they subscribe to on the app.
Guests at Caesar hotels in China can use WeChat to book rooms, manage their reservations and order room service. Their settings and orders are saved so that when a guest books their next stay, the room is arranged the same way they wanted it before.
“You’re collecting data on your audience and just leveraging the same tool your audience uses every day,” said Andrea Ghizzoni, the Milan-based director of WeChat’s European business.
Almost half of registered WeChat users in China have linked their accounts to a credit card, making the app a potential gateway to a huge customer base for European companies. Ghizzoni says companies entering the Chinese e-commerce market need help reaching those customers.
“It’s a totally different environment,” he told euractiv.com yesterday (26 January) after giving a presentation to a room full of fashion, tourism and food industry executives in Brussels on how to set up WeChat accounts. The presentation was organized by ChinaEU, a lobby group that advocates tech cooperation between China and the EU.
“Typically a company approaching a new market would say ‘Okay, let’s open an e-commerce website, let’s do some search advertising on Google and then open a Facebook page.’ None of those work in China because nobody visits open websites, Google is not there and Facebook is not there. So they get lost,” Ghizzoni said.
WeChat users can only shop or pay for services on the app with a Chinese credit card. But for some stores available on the app, customers can keep making purchases when they leave China.
So far, there are more Italian brands with accounts on WeChat than from any other European country. Around fifty Italian firms have set up new accounts on the app since the start of 2016; most of them are luxury and fashion retailers. Ghizzoni said he hopes more British and French companies will start using WeChat because a lot of Chinese tourists travel there and want to buy brands they see when they’re abroad.
That is the app’s lure for tourists: they can have the comfort of using the same service they use at home without withdrawing cash and with the possibility to keep buying from European companies that have accounts and e-commerce shops available on the app even once they’re back in China.
European tourism boards want to keep visitors coming: Tourism jobs employ one fifth of Europeans who work in the services sector, which makes up around 74% of EU GDP in total. Twelve million tourists from China visited Europe in 2015 and President Xi Jinping predicted at the World Economic Forum last week that more Chinese tourists will travel worldwide over the next five years. Last July, European Commission President Jean-Claude Juncker announced that the EU will promote tourism relations with China and host big business expos around Europe and China in 2018.
Tourism from China has pushed European businesses to look to WeChat for customers.
“Every Chinese person uses this app every day. It’s important for us to think about whether we need an official account to really be accessible to Chinese clients,” said Amelia Bian of Europea, a Belgian company that rents out high-end holiday flats in European cities mostly to Chinese tourists. For now, Europea draws clients from travel agencies in China.
Bian said she’s concerned that payments from China to Belgium might not arrive on time or be secure. Some banks have limits on money transfers from China that could make it impossible for tourists to pay for expensive luxury rentals through the app. WeChat does not use end-to-end encryption to secure how users communicate, according to an Amnesty International ranking of messaging apps published last year.
WeChat markets itself to European retailers as a platform that gives them close access to consumers by tracking their shopping interests and showing them ads on a platform where they also chat with friends.
The app company’s new phase of courting European firms comes on the heels of fresh EU legislation that limits advertisers’ ability to track and create a profile of internet users’ activity in Europe. Another draft bill that was announced last year pulled online messaging apps like WhatsApp under EU telecoms law for the first time, making those services beholden to national telecoms regulators who can rule on their data sharing agreements.
Ghizzoni says WeChat uses no algorithm to filter what posts or ads users are shown, marking one way the app seems a deliberate counterweight to some major American messaging services. Facebook has come under fire over the last few months for the way fake news stories were spread on users’ news feeds based on an algorithm that draws on what content users’ click and view to show them posts similar to their interests.
Ghizzoni argues that the app’s ability to showcase a brand to users of its messaging service makes it competitive with Chinese e-commerce giant Alibaba, which already opened offices across Europe as part of a 2015 expansion to attract European companies.
“We are a branding tool better than Alibaba because if you’re a foreign brand and you want to sell to Europe, do you want to open a Facebook page or go on Amazon? It’s not the same thing,” Ghizzoni said.