Life Beyond the Shopping Cart

This is not something a clever developer designed, it is a business model pivot that nobody (but the consumer) could have anticipated

Let us not waste time with pleasantries, and cut straight to the numbers*:

·      M-commerce sales were set to reach $284 billion in 2020; more than 1B mobile phone users use their phones for banking worldwide.

·      Mobile accounted for over 45% of all US e-commerce.

·      67% of the global population owned a mobile phone in 2019; 79% of smartphone users have made a purchase online using their mobile devices.

·      53.9% of all US retail e-commerce will be m-commerce by 2021.

·      The mobile wallet market is expected to reach $5.3 trillion globally by the end of 2020

·      As of January 2020, mobile accounts for 52% of online traffic, with desktop making up for 45.3%; in February 2019, they both accounted for about 48% each.

·      The global market in 2020 for Mobile Messaging Apps is 1.7 billion users, growing to 2.7 billion users by 2027, a CAGR of 6.9%

All very impressive, and not entirely surprising to any of us. Aside from the obvious dominance of mobile as a human behavior pattern there are, in fact, two stories to consider:

1.    The runaway growth of the percentage of e-commerce that is handled through mobile

2.    The emergence of messaging apps as a replacement for the standard web-based shopping experience.

Number 1 is certainly interesting, but number 2 is where things get really exciting.  

What Are We Talking About

With any emerging technology and evolving consumer behavior pattern, some standard taxonomy helps to properly frame the situation. When we say m-commerce or mobile commerce we refer to the buying and selling of goods and services through wireless handheld devices such as smartphones, tablets, and other PDAs. M-commerce is hardly limited to consumer shopping by its standard definition, but includes a much wider set of transaction types including banking, ticketing and travel, health services, and more.

Anyone reading this post, or anyone who subscribes to the Future Shopping newsletter, should be quite familiar with the theory and application of m-commerce. What is less obvious, but infinitely more exciting to a company that sells things online, is the move by popular messaging apps to bring product catalogs, shopping carts, and payment capabilities into their platforms. This is not something a clever developer designed, it is a business model pivot that nobody (but the consumer) could have anticipated. It is the merging of two distinct behaviors - shopping and chatting – thanks to the extension of a capability designed for one purpose to include the other.

For us here today, commerce through a messaging app means 2 things: WhatsApp, which is by far the most popular messaging app in the world, and WeChat, the leading “does-it-all” app in China. The former is still in the very early stages of being at the heart of a significant percentage of digital commerce activity, while the latter is very mature, and thus serves as a good example of how things could evolve over time. 

Without getting too deep into the technology, both business and marketing types would be wise to understand how WeChat works from the standpoint of the consumer experience. WeChat is a standalone social sharing and messaging app. It offers the dual-ability to link with external web-based payment systems as well as have external platforms use the WeChat app’s built-in payment capabilities. Thus:

·      A consumer can purchase products on a brand’s WeChat shop page using the in-app web-based payment capability. While the consumer doesn’t leave the WeChat experience, the interface is working with a web-based payment system as though the consumer had been referred to a different screen to complete the transaction.

·      Brands or retailers can also elect to use WeChat Pay’s SDK to integrate WeChat Pay into their own app experience. When users make payments in other apps, WeChat is authorized to process the payment. Once the transaction is done, the user is returned to the brand's/retailer's app. Thus, if users make a purchase on an external e-commerce platform app on their mobile device, they can choose to pay via WeChat on the payment page.

There are two other features offered by WeChat: The ability for a merchant to generate a QR code that can be utilized at checkout or online to make a payment as well as the app itself creating a barcode that can be scanned by a standard UPC scanner. There’s nothing new here: The ability to use your mobile phone in an NFC environment or by scanning a QR code to effect a payment at physical check-out as well as sending money to a friend or business is already common in many countries. Both small and large financial players have been facilitating mobile payments (particularly in under-banked parts of the world) for many years.

My Thumbs Hurt Just Thinking About It

Here’s the question that we here need to consider: Is there a need for messaging apps to start to enable payments through their platforms? Why would Facebook (the owner of WhatsApp) go to the time and effort to add a payment platform to the messaging/VoIP app? They have all kinds of consumer engagement tricks up their sleeves, I’m sure. The answer: Revenue.

In a 2014 article in Forbes online about Facebook’s acquisition of WhatsApp, Mark Zuckerberg "did signal that both he and WhatsApp co-founder and chief executive Jan Koum don't think that mobile ads are a particularly attractive way to make money from messaging.” Identifying different segments of users to target with ads would be a terrible user experience. 

Introducing a money movement capability into a user experience that has - arguably - become a human behavior adds a whole new layer of relevance for WhatsApp in the lives of its 2 billion (and growing) monthly active users. It represents that aforementioned tasty pivot in the WhatsApp business model, combining two popular online activities (chatting and shopping) in ways that feel organic and natural to consumers.

The proof of concept already exists with WeChat from both the user acceptance and the business impact perspectives. WeChat’s settlement interval (T+1/3/7) and commission rate (ranging from 0.10% to 1.00%) varies from industry to industry but averages 0.60%, with a settlement interval of T+1. Knowing this we can do some very basic math: Assume that 10% of WhatsApp’s global user base (200,000,000) each make purchases worth USD $10.00 per month through the app, and WhatsApp takes only the lowest rate that WeChat takes (0.10%): This scenario brings WhatsApp USD $200,000,000 in revenue per month. Even if WhatsApp’s growth rate starts to slow (because they all do eventually), the company can still realize very significant income from further enhancements to its payment service.

Forget digital advertising, let’s get into mass-scale banking! 

TL/DR time: The remainder of this can be found here at our site.

Our Summer Starts Now

Quick word to you that, after a busy May and June, we will shift to a more relaxed summer schedule, with new articles every other week in July and a positively delicious 3 weeks off in the first part of August.

We will be back the last week of August, and then will resume our relentless pace of e-commerce and digital marketing exploration in the second week of September.

Hit me up with questions or comments here, anytime.

Thanks for reading.