Tencent, JD back online retailer in ‘Alibaba battle’

epa06325916 A Chinese 'kuadi' or delivery man drives his three-wheel delivery cart at a distribution centre for JD.com on Singles Day otherwise known as '11.11' Global Shopping Festival in Beijing, China, 11 November 2017 (issued 13 November 2017). Chinese 'kuaidi' or delivery men are working tirelessly to distribute the 1.5 billion packages that pile up in warehouses after the massive compulsive buying by millions of Chinese on Singles Day. Singles Day is the largest online shopping festival in the world and consumers have made more than 800 million orders in just 24 hours on 11 November, worth 168.2 billion yuan (25.3 million US dollars) sold by electronic commerce giant Alibaba, 42.6 percent more than last year. EPA-EFE/HOW HWEE YOUNG

Bloomberg

Tencent Holdings Ltd. and JD.com Inc. will buy a slice of one of China’s largest online retailers for $863 million, forging an alliance to take on Alibaba in e-commerce and digital payments.
The pair agreed to buy shares in US-listed Vipshop Holdings Ltd. at a premium of 55 percent to their previous close. The deal comes with a business cooperation pact that includes setting aside real estate for Vipshop on JD’s site and Tencent’s digital wallet, a thriving and integral part of the WeChat messaging service used by close to a billion people.
Once known mainly as a video games distributor, Tencent has grown WeChat into China’s premier social media platform. Now it plans to use that ubiquity and JD—in which it holds a significant stake—to fend off e-commerce leader Alibaba Group Holding Ltd. The agreement comes days after Tencent unveiled a $635 million deal to buy 5 percent of hypermart chain Yonghui Superstores Co.—a rare incursion into a physical retail arena that Alibaba covets.
“Tencent and JD need this assistance given Alibaba’s spectacular execution in 2017,” said Blue Lotus Capital Advisors Ltd. founder Eric Wen. “Tencent needs to go from the backstage to the frontstage and that’s what they’ve done. Tencent has acquired a stake in Yonghui and now Vipshop, this is something JD cannot pull off by itself.”
Tencent’s and JD’s backing is a boon for Vipshop, which carved out a profitable niche in women’s fashion but has chalked up two quarters of net income declines. Despite strong growth across categories like electronics, JD is grappling with renewed competition from Alibaba that is making headway into overseas markets. Rather than buy up entire companies, Tencent has preferred to strike deals with key players in segments it cannot dominate, such as e-commerce and search. Apart from JD, it also owns a substantial stake in Sogou Inc.
Its decision to invest jointly with JD may have stemmed in part from Alibaba’s growing dominance in online shopping, aided by a massive cloud computing division that’s among the world’s largest and investments in data capabilities and rural markets. Alibaba’s spending billions on physical retailers, which drive online traffic and serves up valuable data for advertising.

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