US$814m online venture set to take on Alibaba
Print Edition
CHINA’S biggest property developer Wanda Group and Internet giants Baidu and Tencent yesterday unveiled a 5 billion yuan (US$814 million) e-commerce venture in a challenge to industry leader Alibaba Group.
Wanda, facing shrinking retail sales at brick and mortar stores, will hold a 70 percent stake in the new venture, Wanda E-Commerce Co, with Baidu and Tencent taking 15 percent each.
The companies will pour 1 billion yuan into the company in the first year after launch, according to a statement issued yesterday.
The venture will integrate online and offline selling with e-commerce services in Wanda’s 107 shopping malls, as well as its hotels and resorts. Wanda expects its stores and hotels to attract about 1.5 billion customers this year and 5 billion a year by 2020.
The new venture will develop services including online finance, and that could pose a challenge to Alibaba’s popular banking service Yu’ebao, the Associated Press reported.
Baidu is China’s most popular search engine, while Tencent operates the popular WeChat instant message service.
Tencent also owns a stake in JD.com, China’s second-largest e-commerce company. It has also launched ventures to integrate e-commerce and online finance services with WeChat, which it says has more than 400 million active users.
Wanda hopes the combination of the companies’ resources will turn customers at its department stores into online shoppers.
Its stores and hotels will also be converted into service points for its e-commerce units.
At a signing ceremony in Shenzhen yesterday, Robin Li, Baidu’s chairman and CEO, said the company was eager to embrace the real economy to seek more growth potential in future.
The CEO of Wanda E-Commerce, Dong Ce, said the joint resources of the three owners should make the company the biggest of its kind. Alibaba, Baidu and Tencent are increasingly intruding into each other’s core businesses. They have spent more than US$7 billion since the start of 2013 to acquire or launch e-commerce, entertainment and other ventures.
The companies are trying to become one-stop services for customers who increasingly go online using smartphones and want more convenience, according to industry analysts.
Dong said the company expects to sign up 40 million e-commerce users this year and have 100 million next year.
Wang Xiaoxing, a researcher at Analysys International, said: “If the strategy is successfully carried out, it could be a big challenge for Alibaba’s existing business, but the actual results will depend on how much resource Tencent and Baidu is willing to pour into the joint venture.”
In 2012, Wang Jianlin, chairman of Wanda Group, took a bet with Jack Ma, Alibaba Group chairman, that he’d pay Ma 100 million yuan if e-commerce made up more than 50 percent of China’s total retail market size after 10 years, while Ma would pay up if the real economy still had the dominant share.
Industry watchers said it was too early to say whether the alliance could threaten Alibaba’s dominant position, but some said that given Wanda Group’s deeply rooted traditional retail thinking and concepts, it could take a while for it to truly think like an Internet company.
Alibaba made a strategic investment in Yintai Holdings, the department store group, earlier this year, hoping to drive synergies between the two business formats.
China’s business to consumer online shopping transactions reached 320 billion yuan in the first half, with Alibaba’s Tmall taking a 52.4 percent market share, followed by JD.com’s 18.7 percent, says Analysys International.
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