Many major retailers and brands in China embraced mobile payments while Ikea held out. In December, signs went up at cash registers in a Shanghai Ikea to inform customers that they could now pay with Alipay and WeChat Pay, along with Apple Pay.
Zhang Li, a 33-year-old nurse shopping for storage boxes, held up her smartphone to let the cashier scan a payment code on her WeChat app. She uses mobile payments whenever she can because there are often discounts involved. "And you don't need to get out your wallet," she said.
Third-party mobile payments have become ubiquitous in China, and most major brick-and-mortar stores accept either Alipay, affiliated with Alibaba Group, or WeChat Pay from Tencent Holdings, another major Chinese internet company. Ikea has reportedly been testing Chinese mobile payments; it's unclear where the company is in the process or if mobile payments have been formally adopted, and Ikea didn't respond to Ad Age's questions. Starbucks was another holdout, but began accepting WeChat last month.
H&M doesn't take either WeChat or Alipay, and a scattering of smaller brands are still waiting too. They're missing out on a transformation in how Chinese consumers pay for things: In China's big cities, it's possible, even easy, to spend an entire day without your wallet. At a busy 7-Eleven near the Ad Age office in Shanghai, a cashier sometimes rings up four or five clients in a row using Alipay; they line up, the cashier scans a QR code on their phones and they're out the door.
Many mom-and-pop shops accept mobile payments too. Halfway down the block from 7-Eleven, a coffee stand just opened with a sign at the counter proclaiming, "Scan code, no cash." Mobile payment is the only option. An English-language magazine, The Beijinger, just wrote that "even the lowliest filthy street cart accepts WeChat Pay, Alipay and other forms of mobile money transfer these days."
Where mobile is king
China leads the world with its embrace of third-party mobile payments. The gross merchandise value of third-party mobile payments in China in 2015 hit nearly $1.7 trillion, up almost 47% from the previous year, according to data from China's iResearch.
They caught on faster in China than in other markets partly because credit cards aren't as common; many consumers skipped over them and embraced digital payments as smartphone sales took off and e-commerce began to boom.
Chinese consumers also aren't afraid to try new things—but for some Western brands, that speed can be tough to follow.
On Huaihai Middle Road, a shopping strip in Shanghai, brands still not accepting either Alipay or WeChat include Coach, Luxottica Group's Ray-Ban, Nestlé-owned Nespresso and the Moleskine notebook brand. Neither does Apple, which is unsurprising since it has its own payment system. Apple Pay, which partnered with local payment provider UnionPay to launch in China, hasn't caught on here like Alipay or WeChat Pay have.
H&M, expanding fast in China, might be the biggest retailer still holding out. Cherry Shan, a 33-year-old who shopped there in Shanghai recently, heard other customers at the checkout counter asking if they could use Alipay and being turned down. She found that striking. A Chinese woman living in Auckland, she pointed out that even some shops in New Zealand accept Alipay to target Chinese travelers.
For brands across the board, even in areas like luxury, it makes sense to embrace Alipay and WeChat Pay, said Kevin Gentle, general manager of Madjor, the digital transformation agency of China-based Labbrand Group. What might be stopping them?
Executives back at headquarters in Europe or the U.S. might have misconceptions about data security in China. Mr. Gentle believes those concerns are natural but overblown. "Companies should not let an outdated view of China prevent them from doing the right thing," he said, calling Tencent and Alibaba "world-class companies."
Brands also might worry about integrating data from inside and outside China, or with replacing point-of-sale systems, which can be logistically complex. And companies with decision-making centers in Europe or the U.S. "can be slow," he said. "Often, I talk to their local Chinese teams and they say, 'We have to do this now,' but they cannot get the team in Paris or London or New York to understand why they should do it, or to do it fast enough."
Starbucks' slowness on that front was surprising, especially since it was a pioneer in marketing through WeChat several years back. By contrast, KFC and McDonald's started accepting Chinese mobile payments over a year earlier. The coffee chain launched its own payment app first before signing on with WeChat Pay, a decision that struck some observers as surprising given the local context.
"For them to wait until now on WeChat payments was absolutely bizarre," said Mark Tanner, founder of marketing and research agency China Skinny. He points out that brands can prompt customers who use WeChat Pay to become social followers of the brand and send them news and coupons, which is an added bonus, a "no-brainer."
Starbucks plans to more than double its locations in China by 2021, to hit 5,000. Given the speed of that expansion, he said, "Maybe WeChat Pay was just a little bit lower down the priority list."
