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Why m-commerce could be the secret sauce for chat apps

 

With the massive uptake in chat apps, there has been increasing news on how these services are monetizing their audiences – and who will win the race to leverage their userbase for business growth.
 

The secret sauce might lie with m-commerce.

 

It’s already happening right now — Tencent (HKG:0700) owns WeChat, a chat app that allows users to make purchases from retail brands.

 

Recently, they even announced a payment function for McDonald’s within the chat app itself. It’s not alone – similar apps like Viber are starting to monetize their audiences and introducing innovative new business models. Line, for example, allows users to see gourmet coupon offers from nearby places, with 32 percent of their 200 million registered users having already used such coupons.

 

Using data from our Mobile Life 2013 syndicated research on mobile consumers, we can plot countries on an axis of mobile chat app penetration versus m-commerce penetration. It is evident from the varying GDP per capita that the value side of the m-commerce equation differs across markets. However, the distinct visual correlation (the higher the mobile chat app penetration, the higher the m-commerce penetration) seems to suggest that, with increasing penetration of these two mobile technologies, the opportunity for widespread convergence of chat apps and m-commerce is on the horizon.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

What can chat apps do to address this coming convergence?

As a starting point – we need to know where the best places are to catch the trend. M-commerce has a distinct geographical aspect to it. Apart from online shopping, mobile couponing is an emerging trend that leverages on local brick and mortar retailer networks. Hence, it is imperative that we prioritize the right markets to push the convergence of these two technologies.

 

High convergence potential markets

Countries that occupy the top right hand quadrant reflect the highest opportunities arising from convergence. Given the homegrown success of KakaoTalk and WeChat, Korea and China provide a captive audience for active monetization.

Beyond these markets, Hong Kong is a good market to monitor given its high-end retail opportunity and propensity for mainlanders — who mainly use WeChat — to hop over to Hong Kong for shopping.

According to the Hong Kong Tourism Board, the number of mainland tourists coming in annually is about three times the size of the resident Hong Kong population; this presents a clear opportunity for a chat app like WeChat to work together with retail establishments to offer mobile coupons targeted at bringing high-end products and services to Chinese tourists.

Taiwan is also another interesting market to monitor for convergence. Like Hong Kong, it has high GDP per capita as compared to China. But more importantly, the chat app Line has already gained a leadership position in that market with over 70 percent penetration amongst chat app users. Now would be a good time for Line to use its leadership position to gain exclusive relationships with retailers and quickly roll out its m-commerce offering, thereby securing first-mover advantage.

 

Low convergence potential markets

A combination of logistical challenges, limited internet infrastructure and low credit card penetration has inhibited the growth of e-commerce, not to mention m-commerce in these markets. However, low potential might be a bit of a misnomer. There are still opportunities as long as chat apps adopt a city-level strategy. Take Indonesia, for example. The most viable roll-out would be limited to Jakarta where chat app penetration is nearly 50 percent higher than the national average. Moreover, a limited roll-out will ensure that retailer acquisition efforts are geographically focused and not spread too thin over a massive landmass.

Everyone knows Blackberry Messenger (BBM) is the main chat app in Indonesia and now that it has been unleashed from the BlackBerry walled garden, one would expect the userbase to accelerate even further. However, the key question is how BBM intends to monetize all these users. Assuming they start to dabble with m-commerce, overcoming payment challenges would remain key in a market where cash has traditionally been king.

 

What does this mean for retailers interested in the m-commerce ecosystem?

Mobile marketing will become more important than ever. Chat apps and their extensions will emerge as a key platform for retailers to tap into a massive mobile userbase and drive footfall into brick and mortar stores with mobile coupons and deals. In Korea, 68 percent of consumers are already making use of such offers. Moreover, retailers like Baskin Robbins and Starbucks already use the Kakao “gift” service to send mobile coupons to their friends for redemptions. From 107 products in 2010, this service now covers 9,970 products currently – suggesting strong demand from retailers to take advantage of convergence.

While we see Korea as a frontrunner in the convergence race – prospects do look rosy for the rest of the region. In Hong Kong and Taiwan, 30 percent and 40 percent of consumers respectively have expressed receptivity to location activated deals and offers. And what better way to capitalize on this opportunity than through chat apps?

It seems like any company with a significant retail presence will need to properly measure and gain insights into the coming technological convergence so that they do not miss this digital shift.

Note: Unless otherwise stated, all data comes from TNS syndicated research Mobile Life 2013. This is a global study on the consumer mobile space and covers 38,000 interviews spanning 43 markets. The interviews were conducted in January 2013.

(Editing by Terence Lee)

 

Source from http://www.techinasia.com/mcommerce-secret-sauce-chat-apps/

 

 
 

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