Retail in Asia

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Starbucks China finally joins WeChat payments

WeChat lets users text friends, post selfies and pay a gas bill with a smartphone. From 7 December, the blockbuster Chinese app, known as Weixin Pay in China, can also be used to buy a Java Chip Frappuccino.

Starbucks Corp. said it will accept the WeChat payments system at about 2,500 of its cafes across China, enabling customers to complete purchases with a scan of their phone. The agreement with Tencent Holdings Ltd. means the Seattle-based chain joins foreign retailers, including KFC, Disney and Uniqlo, in embracing the cashless mobile payments ubiquitous in China.

About 200 million consumers use Weixin Pay and Alipay, the system owned by Alibaba Group Holding Ltd.’s financial affiliate, at physical stores because of the ease and speed at which consumers can make purchases. Some overseas retailers have balked at digitized transactions because of costs involved in changing payment systems and concern that data collected could breach customer privacy.

“Accepting mobile payment would unlock massive value for Starbucks,” said Shaun Rein, managing director of China Market Research Group, in an interview. “Since they couldn’t move customers through the line faster, they were losing 5 to 10 percent of business.”

The cafe chain adopted Weixin Pay as a way to elevate customer experiences and make their purchases “even more convenient,” Starbucks China said in an e-mail response to queries. Rival coffee chain Costa Coffee began accepting mobile payments in China more than a year ago, around the same time as fast food chains McDonald’s and KFC.

Resistance to WeChat

With Starbucks having capitulated, fashion chain H&M of Hennes & Mauritz AB, which has more than 300 stores across mainland China, leads the pack of hold-outs, which also includes furniture store Ikea and Nestle SA’s coffee-machine maker Nespresso.

H&M China spokeswoman Stella Zhou said that the company is “looking into the mobile payment systems, but our focus now is improving our own online platform.” Ikea China’s external public relations spokeswoman Vivienne Jia said that it is in the process of conducting trials of mobile payments in its mainland stores. Nespresso China declined to comment.

Cost and control are the main concerns keeping foreign consumer companies in China from accepting mobile payments, analysts and retailers said. For foreign chains, accepting Chinese mobile payment services usually involves an expensive upgrade to a point-of-sales system that can accommodate Weixin Pay and Alipay while also being compatible with their international systems.

(Source: Bloomberg)