This post originally appeared on WalktheChat, our content partner.
There is no shortage of providers of WeChat stores (WalktheChat is one of them!). But, whether we like it or not, we all have to admit that there is one leader in the market: Youzan. Let’s take a closer look at the largest WeChat store provider in China. We also wrote a step-by-step guide for how to create a WeChat shop using Youzan.
What is Youzan?
Youzan is the largest provider of WeChat stores in mainland China.
If you want to set-up a store for your brand on WeChat for your brand, you need to find a solution provider to help out. Unlike Tmall, WeChat doesn’t have a single interface to set-up stores. Instead, WeChat provides a toolbox for many service providers to design their own offerings.
Most providers (including WalktheChat) provide 2 versions of the WeChat store: an HTML5 store which works also outside WeChat, and a WeChat Mini-program version which is specific to WeChat.
Youzan provides a Software-as-a-Service (SaaS) solution to set-up a WeChat store, which can be managed either via their website or via a native App.
Youzan provides a WeChat store platform enabling brands and influencers (such as Becky Li) to sell through WeChat Mini Program.
The Youzan platform is used by major brands such as DELL or Walch, and by top influencers such as Becky Li.
In a recent conference, Youzan revealed that the traffic to merchants’ WeChat mini-programs was mostly coming from the swipe-down access from the WeChat home page (27%), Official Account Menus (15%) and Official Account articles (14%).
Youzan conference. Photo: WalktheChat analysis.
How big is Youzan?
Youzan claims serving more than 300,000 merchants. It also boasts a Gross Merchandise Volume (GMV) of 33 billion RMB in 2018.
GMV for the first 3 quarter of 2019 is 38 billion RMB.
Youzan conference. Photo: WalktheChat analysis.
The GMV of Youzan has been booming over the last few years, with a YOY growth rate of more than 200%.
This GMV, although significant, remains tiny in comparison to pure e-commerce competitors such as Taobao. Taobao generated 2,689 billion RMB of GMV during the fiscal year 2018, 81 times more than Youzan.
Source: Youzan and Taobao annual report. Photo:WalktheChat analysis.
These figures show that, although WeChat stores drive large volumes of sales, large marketplaces do remain the main channels for e-commerce sales in China.
The group has also been struggling to turn a profit. In fact, its losses widened to 839 million HKD (107 million USD) in 2018.
Youzan annual report. Photo: WalktheChat analysis.
How does Youzan make money?
Most revenues from Youzan come from subscription fees to its WeChat store platform. The company charges between 6,800 to 26,800 RMB / year for access to its platform. More expensive plans give access to more advanced features (CRM, multi-level marketing, electronic fapiaos, additional data, etc.)
Some specific features such as WeChat mini-programs also require merchants to pay additional fees.
These SaaS subscription fees make up for more than half (52%) of Youzan revenues. Another 28% is coming from transaction fees.
Youzan annual report. Photo: Walkthechat analysis.
In contrast, Youzan’s competitor Weimob managed to grow its advertising revenues to account for 66.6% of its business. Weimob thus became more profitable than Youzan, reporting a profit during H1 2019.
Opportunities ahead
There are a lot of cards left to play for Youzan to keep expanding and reach profitability.
The company benefits from the support from Tencent. In April 2019, Tencent invested 1 billion HKD (around $130 million USD) into Youzan, giving it a 6.5% ownership stake in the company. The support from Tencent is of course game-changing for Youzan, given the reliance of the platform on social sales.
Youzan also stroke a deal with Baidu. In August 2019, the two firms launched a joined venture named Qima. This collaboration will enable better integration between Youzan and Baidu’s own mini-program system.
Innovation has also been coming to the WeChat Ecosystem: WeChat now supports live-streaming, which promises to increase GMV and exposure for merchants.
Youzan also partners with Kuaishou, one of the largest short video platform, enabling users to add an e-commerce link to their videos. Although most of the top influencers on Kuaishou still choose to link to Taobao store.
A controversial work culture
Zhu Ming, the founder of Youzan, is generally known as “Bai Ya”. Bai Ya has shocked the media all across China in January 2019 by supporting 996 culture. Although Bai Ya later claimed it’s a misunderstanding and 996 is not a mandatory policy of Youzan.
996 is the expectation that employees will work from 9am to 9pm, 6 days a week. Youzan also requires employees wanting to take more than 3 days of leave during a national holiday to file an application directly with the CEO.
These statements have triggered controversy, but they are not so outlandish in the Chinese tech world. Alibaba’s founder Jack Ma has called 996 a “huge blessing” in April 2019. Richard Liu who runs JD.com, along with other tech founders, has expressed a similar sentiment.
Bai Ya is also a thought leader in the tech and SaaS community. He shares his own take on business-related topics on his personal WeChat blog. Some of the popular articles include SaaS valuation model, company culture, leadership, and product design principles.
Conclusion
Youzan managed to stand out as a leader in the very competitive market of WeChat stores. The company’s revenue and GMV are booming. Youzan also managed to find powerful allies such as Tencent.
The platform is however not out of the woods yet. Its losses are growing faster than its revenue, and its work culture attracted controversy and might make it harder to attract talent.
Youzan will have to fight a tough fight against competitors such as Weimob and LOOK, and against substitution offers such as Tmall or JD.com. But given what has been achieved so far, there are reasons to be hopeful.