It seems that Tencent is preparing to give Alibaba a run for their money with its agreement with JD.com and Vipshop to buy a slice of the latter. Additionally, they signed an agreement of business cooperation that will open the tech giant social media app, Wechat, to Vipshop to attract traffic to its online retail shop.
Tencent will be investing $604 million in Class A shares for a 7% stake, meanwhile JD.com will be investing $259 million for a 5.5% stake. “Tencent and JD need this assistance given Alibaba’s spectacular execution in 2017. Tencent needs to go from the backstage to the front-stage and that’s what they’ve done,” said Eric Wen, Blue Lotus Capital Advisors Ltd. founder, to Bloomberg News.
Once known as a videogame distributor, Tencent is now a powerhouse in the China tech industry thanks to its Wechat social platform, which is the most widely used in the Chinese mainland. That’s why Tencent has been investing recently in a partnership that will make its platform for e-commerce. Recently, the company has invested in Yonghui Superstores, a rare move into the brick and mortar retailers, but much in the line of streak deals with dominant forces in markets that they don’t dominate completely.
The co-inversion in Vipshop, the biggest online discount retailer in China, is aimed to rock the Alibaba’s dominance of Chinese e-commerce. Only time will tell if this was a wise choice.