Alibaba, Tencent rally troops amid $10 billion retail battle

China’s tech giants Alibaba Group Holding and Tencent Holdings, worth a combined $1 trillion, are on a retail investment binge, forcing merchants to choose sides amid a battle for shoppers’ digital wallets.

Since the start of last year, the two companies have between them spent more than $10 billion on retail-focused deals, boosting their reach online and in bricks-and-mortar stores.

The aggressive drive, supported by large cash piles and soaring share prices, is part of a battle to win over consumers and store operators to the two firms’ competing payment, logistics, social media and big data services.

The result: fewer and fewer retailers left without allegiance to either Tencent or Alibaba.

“All of the retailers in the bricks-and-mortar world are very worried. They have to take a side,” said Jason Yu, Shanghai-based General Manager of market research firm Kantar Worldpanel. “Otherwise they are afraid they will be eaten alive in the future.”

Alibaba is China’s top e-commerce player and its affiliate Ant Financial leads in mobile payments. Tencent’s strengths lie in social media, digital payment and gaming. It also has a major stake in the second-largest online retailer, JD. Com.

Tencent and JD.com have a growing range of allies, including French grocer Carrefour SA, which has announced a potential investment from Tencent, and US retail giant Walmart, which has a stake in JD.com.