Tmall's Interconnection with WeChat: Unveiling the Secret to 800 Billion Yuan GMV Growth Potential
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Tmall's Interconnection with WeChat: Unveiling the Secret to 800 Billion Yuan GMV Growth Potential"This will be the year with the highest number of purchasing users on Tmall Double 11." A senior executive from Tmall's user platform department expressed full confidence in this year's Double 11
Tmall's Interconnection with WeChat: Unveiling the Secret to 800 Billion Yuan GMV Growth Potential
"This will be the year with the highest number of purchasing users on Tmall Double 11." A senior executive from Tmall's user platform department expressed full confidence in this year's Double 11. This confidence stems partly from the "mutual embrace" between Tmall and WeChat - after fully integrating with WeChat, Tmall's monthly active users soared to a new high of 944 million. The effectiveness of the interconnection between these two giant apps is evident. Moreover, according to institutional reports, Tmall's open-door policy for business is poised to reap further benefits. Both CICC and JPMorgan Chase estimate the increase in Tmall's new users to be around 200 million, with JPMorgan Chase even optimistically forecasting a 30% increase, equivalent to 300 million new users.
While the trend is widely discussed, the market remains divided on how the interconnected strategy will affect Tmall and its certainty. This article will delve into the details of this issue from dimensions such as user profile composition, conversion difficulty, and monetization efficiency, aiming to calculate the exact amount of growth value that Tmall can reap after interconnection.
Who will contribute to the growth value after interconnection?
After bridging the gap, previously WeChat-exclusive users become potential new users for Tmall, while existing WeChat users who already use Taobao may increase their spending frequency, both contributing to GMV growth.
Regarding WeChat-exclusive users, according to QM data, their population is 246 million, primarily composed of high-frequency online shoppers who "buy frequently but have never used the Taobao ecosystem" and infrequent shoppers who don't shop online frequently. Their contributions to GMV are different. We classify users who use shopping apps more than 20 times per month (equivalent to twice every three days) as high-frequency online shoppers, while those who use them less than 20 times (including those who don't shop online) are considered infrequent shoppers. Based on this, there are 115 million new high-frequency online shoppers and 131 million infrequent shoppers. For existing Taobao users on WeChat, their number, according to QM data, stands at 816 million, and after removing the "firewall," their spending potential will be unlocked further.
Group 1: The newly added 115 million high-frequency online shoppers can potentially generate 385 billion yuan in GMV
Analyzing the shopping behavior of WeChat-exclusive high-frequency online shoppers reveals that these users were either discouraged by issues such as unsupported WeChat Pay or inability to open Taobao links, or their shopping needs are satisfied by group buying groups or specific apps and don't require Tmall. After interconnection, users discouraged by operational inconveniences are likely to switch to Tmall, but those loyal to group buying groups or other channels may not. Since the former group is difficult to estimate in scale, while the latter is easier to statistically analyze, we can estimate the number of high-frequency online shoppers who will migrate to Tmall by determining the number of "die-hard fans" of fixed channels.
Penetrable user count: The current private domain penetration rate in the e-commerce industry is about 30%, and WeChat's rich e-commerce ecosystem, including shelves, group buying groups, short videos, and live streaming, has achieved maturity and resembles the overall market ecosystem. We roughly estimate that the proportion of private domain users is comparable to industry levels, leading to an estimated 34.5 million "die-hard fans" of fixed channels. After excluding this group from the 115 million, we arrive at an estimated 80 million high-frequency online shoppers penetrable by Tmall.
Spending frequency: Tmall's e-commerce ecosystem is more mature than WeChat's, and user shopping habit cultivation is also more advanced. Assuming that Tmall's average user spending frequency can be used as a reference for WeChat's high-frequency users, we estimate that these users will make an average of 80 online purchases annually. However, after the "firewall" is removed, they won't completely abandon their original shopping channels, meaning that these 80 purchases might only partially be made on Tmall. Over time, their shopping behavior will gradually align with the overall market norm. Based on this, calculating based on Tmall's transaction volume accounting for 45% of the overall e-commerce market, we conclude: WeChat-exclusive high-frequency users will allocate 36 purchases annually to Tmall.
Spending amount: Using the annual average spending amount of active buyers on Pinduoduo, JD.com, and Tmall as a reference, we can estimate that these users spend approximately 75.2 yuan per purchase. Based on this, the newly added high-frequency online e-commerce users can contribute 216.6 billion yuan in GMV growth to Tmall. (GMV growth = 80 million users 36 purchases 75.2 yuan per purchase = 216,576 million yuan)
- This is a neutral assumption-based calculation. In reality, there are high-frequency users who can quickly switch their consumption channels - experienced online shoppers - as well as those who require time to cultivate usage habits - "slow-paced" users. Different penetration scenarios will impact GMV contributions. If a sensitivity test is conducted for the allocation ratio of the 80 purchases, the final GMV growth will range from 96.3 billion to 385 billion yuan.
Additional notes:
1. The private domain penetration rate (30%) in the e-commerce industry is derived from data from iResearch Consulting, which shows that most users spend 15%-45% of their online shopping expenses on private domain channels. Additionally, according to data from the National Bureau of Statistics and 100EC, the scale of private domain e-commerce accounts for 37% of overall online shopping. Taking the two together, we take the median value of 30%.
2. The consumer frequency (80 times) of Taobao users is derived from official disclosures, indicating that the annual purchase frequency per user on Tmall is about 80 times in 2023.
Group 2: The newly added 131 million infrequent online shoppers can generate 339 billion yuan in GMV
Similarly, analyzing the behavior of WeChat-exclusive infrequent online shoppers reveals that they can be broadly divided into two categories: "those who can be penetrated by content e-commerce" and "those who are more accustomed to offline shopping." The former group, under the influence of short videos and live streaming, is more likely to become Tmall's patrons.
Penetrable user count: Using the same reasoning as above, based on the maturity of WeChat's e-commerce ecosystem, we estimate the number of users in this group who can be newly penetrated by content e-commerce based on overall market conditions (domestic live streaming e-commerce user penetration rate of 54.7%), reaching approximately 72 million.
Spending amount: Since most of the infrequent online shoppers on WeChat belong to the group outside the Fifth Ring Road and the elderly population, and most of the older people who don't like to shop online are also outside the Fifth Ring Road, their spending power can be roughly estimated based on the user representative of the sinking market. Currently, the per capita disposable income of rural residents is about 55.8% of that of urban residents. If we take the average annual spending amount per user on Tmall as a reference (8,436 yuan, as Tmall is a national-level app and its core user base is in higher-tier cities), then after these sinking market users are penetrated by Tmall, their average annual spending amount per user is about 4,780 yuan. Based on this, the newly added infrequent online shoppers will contribute approximately 339 billion yuan in GMV annually to Tmall. (GMV growth = 72 million users 4,780 yuan per year = 338.96 billion yuan)
Additional notes:
After a longer period of time, we believe that these 72 million users who may be influenced by content e-commerce can gradually penetrate to Tmall. Therefore, we don't conduct sensitivity testing for infrequent online shopping groups.
Group 3: 816 million existing Taobao users can potentially generate 364.3 billion yuan in GMV
Among the existing Taobao users on WeChat, high-frequency users have already developed the muscle memory of opening the orange app for online shopping. Interconnection won't significantly change their spending frequency. The ones who are likely to be stimulated by interconnection are the mid-to-low frequency users who were previously blocked by the "isolation wall."
Penetrable user count: The China Internet Association defines users who place 30-60 orders annually on Tmall as mid-frequency users, while those with less than 30 orders are considered low-frequency users. Based on this, among the 816 million existing overlapping users of Tmall and WeChat, there are 343 million mid-frequency users and 163 million low-frequency users.
Spending frequency: Taking the average number of annual orders as a representative of their spending frequency, we get
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