On March 15 shoppers at Wal-Mart’s Chengdu stores were greeted by a sign informing them of a change to how they could pay. On the list: Unionpay, Apple Pay and WeChat Pay. Off the list: Alipay. Customers at other locations discovered the same and Wal-Mart later confirmed that it had dropped Alipay as an option from all of its stores in western China, including provinces like Sichuan, Yunnan and Gansu.
A company spokeswoman said it had entered into a “partnership’ with WeChat Pay, which was a “business decision” to improve customer experience.
For Tencent and Alibaba, pushing for exclusive deals on their payment apps has become standard practice in an escalating war for dominance in the mobile payments market.
For example, the news site Jiemian notes that WeChat Pay was fully integrated into Starbucks’ China stores a full nine months ahead of Alipay, because the coffee chain signed an agreement to “promote” the Tencent payments app. Wal-Mart has also announced new promotions for shoppers who pay with WeChat Pay.
The two firms make likely partners, as both have investments in the country’s second-largest online retail store, JD.com. Tencent is JD.com’s largest shareholder while Wal-Mart owns a 12% stake – having sold its own online division to JD.com in July 2016 (see WiC331).
The rivalry between Tencent and Alibaba is clear to see: Alipay isn’t accepted on JD.com, while WeChat Pay isn’t welcome on Alibaba’s e-commerce platforms.
The online struggle is moving steadily into real-world locations, like Hunan-based retailer Better Life, which has also removed Alipay from a number of its stores.
A representative for the firm told the Global Times the reason is that Alipay is “too aggressive” when it comes to data ownership, and that it is often reluctant to share customer information with the retailer.
Better Life also signed a strategic agreement with Tencent and JD.com in February this year, selling 5% and 6% of its stock to each company respectively and pledging to support “smart retail” – Tencent’s counter move to Alibaba’s “new retail” concept (see WiC375).
While Alipay is still the leading force in mobile payments, its lead over Tencent has diminished significantly. According to Forbes, Alipay held 70% of the market in 2014, but that share had dropped to 53% by the third quarter of last year despite a 28% growth in overall market size.
Tencent has a 40% market share and Steven Zhu, an analyst at Pacific Epoch, told Forbes that its leadership in social media gives it an edge.
“WeChat Pay will have stronger growth potential compared to Alipay, which is literally just expanding alongside e-commerce… Talking about the future in China, the advantage is leaning towards WeChat,” he claims.
Alibaba’s focus on O2O has seen it investing heavily in bricks-and-mortar retail chains in recent years, inking deals with leaders such as Intime and Suning, and developing its own smart store concepts.
In another O2O move this week, it announced it would buy up all the remaining shares in Ele.me, a leading food delivery service, in a deal valuing the platform at $9.5 billion including debt.
The purchase helps Alibaba to create a more comprehensive ecosystem, integrating product listings, deliveries, and payments – something Tencent has achieved successfully with its rival food delivery champion Meituan-Dianping.
Tencent president Martin Lau says that his company’s payments services are already the market leader if measured by monthly active users. And riding high on fourth quarter profit growth that nearly doubled to Rmb20.8 billion ($3.29 billion), Tencent CEO and founder Pony Ma said that Tencent would also be “substantially increasing” its investment in key areas, including “smart retail”, signifying that the payments war with Alipay is far from over.
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