JD.com, China’s largest online retailer in terms of direct sales, has taken another step to mesh its business with that of Tencent, the Chinese online messaging and gaming giant that bought a 15% stake in JD.com in March.
In the latest move, JD.com has created a free service called Paipai Weidian that lets small merchants and individuals easily create their own mobile commerce sites and to promote their wares on Tencent’s popular QQ and Weixin messaging systems. Weixin, known outside of China as WeChat, has 468 million active monthly users, Tencent says.
JD.com launched Paipai Weidian in September, and it had it first big sales day on Nov. 11, the online shopping holiday day known as Singles’ Day in China, when merchants using the service generated 100 million yuan ($16.2 million) in sales, according to Guo Bin, the director of Paipai Weidian. There are now more than 10,000 sellers using the Paipai Weidian service, and daily visits to their mobile stores top 4.5 million.
The tie-in with Weixin is particularly important for these small mobile merchants, Guo says. “The communications on Weixin are between you and your friends, so there is a higher level of trust among Weixin users,” he says. “If one friend posts a message to recommend a product, many users may give it a try. If the users are satisfied with the product, they may spontaneously re-post.”
As part of the March alliance that gave Tencent a 15% stake in JD.com, JD.com acquired some of Tencent’s e-commerce assets, including the online marketplace Paipai.com, which competes with the giant Taobao shopping portal of China’s dominant e-commerce player, Alibaba Group. While Alibaba’s marketplaces, Taobao and Tmall, account for about 80% of online retail purchases, Alibaba does not itself own merchandise and thus is not the retailer of record for purchases made on its sites. JD.com, which does sell merchandise it owns as well as allowing other merchants to sell on its e-commerce site, is the No. 1 retailer in the Internet Retailer China 500.
Merchants that use the Paipai Weidian service can list products they are selling on Paipai.com to their mobile stores with a single click. The partners also make it easy for Paipai Weidian merchants to advertise on Tencent’s social platforms. “On Singles’ Day, Paipai’s merchants bought 6 million yuan worth of ads ($1 million) on Tencent’s online ad networks and the average cost-per-click is only 0.42 yuan (about 7 cents), which is much lower than the average on other online ads channels,” Guo says.
In addition, Paipai has designed several marketing tactics designed to help merchants. For example, Paipai recently launched a new group-buying business Pai Pianyi, which means “get a deal” in Chinese. On Pai Pianyi, a minimum number of consumers must buy a product to get the best deal, in imitation of the early days of Groupon in the United States.
In addition to making Paipai Weidian available for free, JD.com is charging no commissions for sales on Paipai.com or charging merchants to use Tencent’s online payment system, Tenpay.
Alibaba Group’s Taobao.com also lets merchants sell for free, but merchants pay a commission, about 1% in most cases, when consumers pay with Alipay, a payment service affiliated with Alibaba. Alipay is the leading online payment company in China and the main way consumers pay on Taobao, in part because payments are put into escrow and not released to the merchant until the consumer indicates she is satisfied with the purchase.
Alibaba and other online marketplaces typically earn revenue by selling ads to merchants on their marketplaces.