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Tencent-JD.com alliance intensifies e-commerce challenge to Alibaba

Partnership may reshape China's e-commerce market as more people shop using smartphones

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The new alliance between Tencent and JD.com intensifies the e-commerce challenge to market leader Alibaba. Photo: SCMP
The mainland's rapidly expanding e-commerce landscape is poised for a seismic shift after Tencent agreed to acquire a 15 per cent stake in online retail platform JD.com for US$214.66 million, ratcheting up their challenge to market leader and common rival Alibaba Group.

Shenzhen-based Tencent, through subsidiary Huang River Investment, also committed to subscribe to an additional 5 per cent of JD, following the Beijing-based firm's planned initial public offering in the United States.

"By acquiring a stake in the mainland's second-largest business-to-consumer platform, Tencent can more effectively compete against Alibaba in the e-commerce sector," said Ricky Lai, a research analyst at Guotai Junan International.

Data from internet consultancy iResearch showed that JD had a 17.5 per cent share of the business-to-consumer e-commerce market in the third quarter of last year, while the online retail operations under third-ranked Tencent E-commerce had a combined 6 per cent share.

Tencent, Asia's largest internet company, has opted to restructure its e-commerce operations so that JD can close the gap with Alibaba's Tmall.com which held a 51.1 per cent share in the mainland's business-to-consumer retail market in the same period last year.

In a statement, Tencent president Martin Lau Chi-ping said: "Our strategic partnership with JD will not only extend our presence in the fast-growing physical-goods e-commerce market, but also allow us to better develop our enabling services such as payments, public accounts and performance-based advertising network."

As part of the transaction, JD will take over the operations of Tencent's QQ Wanggou and PaiPai e-commerce businesses, logistics personnel and other assets. It will also get a minority stake in 51buy.com also known as Yixun, an online site selling smartphones and appliances.
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