Update | Tencent moves into Alibaba turf with US$863 million retail investment
Deal signals aggressive push by Tencent into online Chinese retail sector currently dominated by Alibaba’s Tmall
Competition in the world's largest online retail market is about to get even stiffer.
Tencent Holdings, operator of the ubiquitous WeChat messaging app in China, is acquiring a stake in US-listed Vipshop in a direct challenge to Chinese e-commerce giant Alibaba Group which accounts for four-fifths of online clothing sales in the country.
Tencent, together with China’s second largest retailer JD.com, will invest a combined US$863 million in cash in online fashion retailer Vipshop, representing a 55 per cent premium to Vipshop’s closing price on the New York stock exchange on Friday. JD’s shares rose as much as 4.4 per cent will Vipshop soared 49 per cent in New York trading on Monday.
The deal signals Tencent’s determination to push more aggressively into the retailing sector and compete directly with Alibaba Group, which has come under fire from JD.com for using its dominance to force clothing merchants to choose sides or be squeezed out of business, a charge Alibaba has denied. Tencent is a major shareholder in JD.com.
Under the arrangement, Vipshop gains access to buyer traffic from Tencent’s Weixin platform, while JD.com will provide Vipshop with access to the main webpages of its mobile application and its Weixin Discovery shopping site, and will assist Vipshop in achieving certain gross merchandise value (GMV) targets through JD.com’s platform, the Tencent statement said.
“The deal combines Vipshop’s strength in clothing and cosmetics with JD’s focus on electronics and is complementary for the two companies,” said Li Yi, a researcher at the Shanghai Academy of Social Sciences internet research centre.