Are China’s two biggest companies nearing an E-Commerce showdown?

Tencent, investing heavily in online retail, takes aim at Alibaba

China’s most valuable company Tencent is upping its ante in retail, announcing a major investment into online retailer Vipshop in a move that could establish a new rivalry with Chinese e-commerce king Alibaba.

Tencent will invest USD 604 million in Vipshop in return for a 7% stake, the companies said Monday. JD.com, China’s second-largest e-commerce firm, said it would also invest USD 259 million into Vipshop, a smaller rival.

Following the transaction, the two companies will own a combined 12.5 % of Vipshop. They will direct traffic to the site, namely from China’s most popular social network, WeChat, which is owned by Tencent.

The deals aim to challenge Alibaba’s years-long supremacy in the booming Chinese e-commerce market. Having tried and failed to gain a foothold in online retail in recent years, Tencent is increasingly relying on JD.com, of which it owns 18%, to bolster its challenge of Alibaba.

Tencent made its first foray into physical retail earlier this month, paying USD 638 million for a 5 % stake in supermarket chain Yonghui Superstores .

The transaction of December 18, 2017 will bring together China’s second-and-third biggest business-to-consumer e-commerce sites—after Alibaba’s Tmall—according to research firm Analysys.

JD.com has been gaining market share in recent years against Alibaba, and will look to Vipshop to fuel its growth in both the apparel market and in luring all-important female customers—Alibaba’s strongholds.

JD.com also has a partnership with Wal-Mart, which owns a 10 % stake in the retailer.

JD and Vipshop combined could put a dent in Alibaba’s dominance, especially with the help of customers driven from Tencent’s social media platforms and mobile-payment network. Luxury brands including Burberry and Longchamp are already successfully using WeChat to sell their products.

Tencent’s Tenpay, the country’s second biggest mobile-payment system, is also catching up with Alipay, owned by Ant Financial, Alibaba’s finance affiliate. Tencent’s deeper move into e-commerce could boost Tenpay.

A showdown between China’s two largest companies could be underway.

www.wsj.com