Tencent Holdings Ltd, a Chinese internet giant, has announced that it will lead in making an investment worth approximately $863 million in Vipshop Holdings Ltd, an apparel platform. The internet giant will be joined by JD.com which will acquire a 4% stake in Vipshop by investing $259 billion. Tencent will acquire a stake of 7% at a price of $604 million.
It is expected that the deal will assist Tencent in tapping Vipshop’s young female shoppers where the internet giant will get access to transaction and consumer data in order to give it an edge over Alibaba’s payments platform, Alipay.
This is the most recent push by Tencent into the retail sector where it will battle it out with Alibaba. Tencent intends to leverage its digital payment systems and WeChat, its messaging service, in driving demand. Currently WeChat has close to a billion users. According to the president of Tencent the partnership would benefit Vipshop by offering payment support, marketing solutions and audiences.
Battle of the giants
A looming retail battle between Alibaba and Tencent is yet another round in a long-running stand-off between the two Chinese tech giants who have in the last couple of years made competing investments in sectors such as gaming, food delivery and bike-sharing apps.
“Right now in the Chinese market we have two internet powers. Investments will either fall into the Alibaba or Tencent camp,” Bain & Company’s managing partner, Weiwen Han, said.
In the recent past Alibaba has been trying to reshape the retail market in China by integrating traditional retail with online retail. Alibaba’sTaobao and Tmall platforms are dominant in e-commerce but the Chinese firm has invested more than $10 billion in physical stores. Tencent is also copying the strategy as it is planning to invest approximately $636 million in Yonghui Superstores Co Ltd for a 5% stake. The internet giant is also a major stakeholder in the second-largest e-commerce firm in China, JD.com.
Mobile strategy game
Tencent’s investment in Vipshop coincides with the internet giant’s plans to introduce one of its biggest mobile strategy games, Honor of Kings, to markets outside China. In the world’s most populous country, the game has managed to win monthly players number approximately 200 million since it was launched two years ago. Currently the game is being reworked for the European and US markets where it will be referred to as Arena of Valor.
In the past Asian mobile titles have failed when introduced in the West. This includes Monster Strike whose English version had to be shut down despite the fact that it generates over $1 billion annually in Asia.