Guotai Junan Securities: WeChat's "Send Gift" function is catalyzing the progress of e-commerce and is expected to bring new opportunities for consumer spending.

Guotai Junan Securities released a research report stating that the launch of the "Gifts" feature on WeChat Mini Stores is an important catalyst for the development of the WeChat e-commerce ecosystem. Channel changes are expected to bring new consumer opportunities, with snacks, beauty products, and e-commerce operators expected to benefit first. Below is a summary of the research report: Summary: The launch of the "Gifts" feature on WeChat Mini Stores is an important catalyst for the development of the WeChat e-commerce ecosystem. Channel changes are expected to bring new consumer opportunities, with snacks, beauty products, and e-commerce operators expected to benefit first. Key points: Snacks, beauty products, and other categories with gift attributes and e-commerce operators. Recommendations to increase holdings: 1) Snacks: Three Squirrels Inc., Yanker Shop Food, Jinzai Food Group, YouYou Foods, WL DELICIOUS, Chacha Food, Shanghai Ziyan Foods, Juewei Food Co., Ltd.; 2) Cosmetics: Guangzhou Ruoyuchen Technology, CHICMAX, Yunnan Botanee Bio-Technology Group, Runben Biotechnology, Wanmei Jiufen, Proya Cosmetics, GIANT BIOGENE. Beneficiary: Qingmu Tec Co., Ltd. The "Gifts" feature on WeChat Mini Stores is expected to replicate the success of WeChat Red Packets, catalyzing the development of the WeChat e-commerce system. The WeChat ecosystem has a huge social traffic volume, with a combined monthly active account number of 1.382 billion for WeChat and WeChat as of 24Q3, significantly higher than Taobao (900 million+) and Douyin (800 million+) and other shelves and content e-commerce platforms. Referring to the success of the WeChat Red Packets during the 2015 Chinese New Year with the "shake to get Red Packets" activity during the Spring Festival, which led to 200 million personal bank card bindings out of 500 million yuan invested in Red Packets (previously, by the end of 2014, WeChat Pay and QQ Wallet only had 100 million bank account bindings), promoting the rapid popularization of WeChat Pay. With the launch of the "Gifts" feature on WeChat Mini Stores coinciding with upcoming festivals such as Christmas, New Year and Spring Festival, it is expected to quickly foster user traffic through holiday gift-giving demands, driving users to WeChat Mini Stores and cultivating shopping habits on WeChat. Additionally, the convenience of purchasing on WeChat Mini Stores is expected to help further expand the user base of some non-public domain e-commerce users, increase the coverage of the e-commerce population, bring new channel opportunities to consumer brands, and it is expected that brands will actively introduce corresponding product combinations for gift-giving scenarios to capture emerging channel opportunities. In the second half of 2024, the WeChat e-commerce ecosystem will continue to evolve, and WeChat Mini Stores are expected to form a closed loop with the diverse content ecosystem on WeChat, disrupting the e-commerce landscape. Since 2024, there have been frequent attempts at WeChat e-commerce, such as in August 2024, WeChat supporting businesses to upgrade their Video Number Mini Stores to WeChat Mini Stores, allowing store and product information to freely circulate in multiple WeChat scenarios such as public accounts, Video Numbers, Mini Programs, and Search, providing businesses with a broader marketing channel and traffic entry. In September, the entry threshold and deposit for businesses were significantly reduced, and a zero deposit trial operating policy was introduced; in October, the "WeChat Mini Store Assistant" standalone app was launched; in November, the pace of upgrading Video Number Mini Stores to WeChat Mini Stores has accelerated, and businesses need to upgrade in order to continue operations. With WeChat Mini Stores being unified as an e-commerce entry point, it is expected to integrate with various WeChat content and user scenarios to form a diversified e-commerce model. For example, WeChat Mini Stores + community will evolve into social e-commerce; WeChat Mini Stores + search will become shelf e-commerce; WeChat Mini Stores + Video Number will be short video/live streaming e-commerce, and WeChat Mini Stores + public accounts will be image-text merchandise sales. This launch of the "Gifts" feature on Mini Stores is expected to be an opportunity for community segmentation, laying a solid user foundation for the long-term development of the WeChat e-commerce ecosystem. Channel changes are expected to bring new consumer opportunities, with snacks, beauty products, and e-commerce operators expected to benefit. Considering the gifting scenes of Double Eleven and Lunar New Year, emotionally driven new consumer categories with gift and social attributes such as snacks, beauty, and personal care products are expected to benefit first from the "Gifts" feature on WeChat Mini Stores. For example, Three Squirrels Inc. launched the Hungyun Gift new nut gift box on WeChat Mini Store; beauty and personal care brands such as Proya Cosmetics, Hanshu, Weenna, Kefumei, Wanmei, and Zhu Zhai have layouts on WeChat Mini Store and Tencent Video Number, with gift products and sets, also expected to benefit. In addition, e-commerce operators are sensitive to the rise of new channels and new traffic, and are also expected to benefit. Risk warning: Industry downturn; intensified brand competition; new product performance below expectations, etc.