Tencent is seeking more avenues for its 980 million WeChat users to shop and spend.
China’s top think tank predicted in 2016 that one in three of the country’s estimated 4,000 shopping malls would close within five years as consumer spending shifted online and millennials prefer swiping through websites than ruffling through clothes racks.
Tencent Holdings, together with JD.com, Suning Commerce and Sunac China, is out to prove the forecast wrong, with a 34 billion yuan ($5.4 billion) investment in mall operator Wanda Commercial, in what’s been billed as one of the largest deals between internet companies and physical retail that will create a “new consumption model” integrating online and offline services. Alibaba Group owns 20 per cent in Suning.
The investment is the latest in a collection of assets that Tencent is putting together as it seeks content and spending avenues for its almost 1 billion social-media and mobile payments users.
“Tencent, if [the company] wants to retain its strong growth, has to exploit new areas or step into its competitors’ territory,” said Li Yi, chief fellow at the Shanghai Academy of Social Sciences. “The story is the same for Alibaba.”
Led by Pony Ma Huateng, Tencent’s foray into retail has meant it increasingly competes head-on with Alibaba Group, China’s biggest e-commerce company founded by fellow billionaire Jack Ma Yun.
Ma has put forth what he calls “New Retail” as the way forward, in which the lines between online and high-street browsing blur. Recommendations are pushed to shoppers in stores and purchases are made online with deliveries sent to their homes in seamless transactions, for instance.
Last week, Shenzhen-based Tencent agreed to buy a stake in Star Trek and Mission: Impossible producer Skydance Media. The deal is part of a broader strategic partnership that would allow Tencent to co-finance Skydance’s films, distribute and merchandise them in China. The pact also supports collaboration on television, interactive and virtual reality.
Tencent also signed a deal to invest in French hypermart operator Carrefour’s China operations, and opened an unmanned grab-and-go store in Shanghai, extending a bet that marrying online shopping with physical retail would boost mobile payments.
WeChat, Tencent’s instant messaging app, already has about 980 million monthly active users out of a population of 1.38 billion, making it difficult to keep growing the pool. Those hundreds of millions, however, are consumers Tencent can count on when it expands into retail, Li said.
“More and more companies are combining online and offline operations,” said Zhao Ziming, senior analyst at Beijing-based consultancy Cyzone. The trend is “not just limited to Tencent, who may feel concerned when it sees its competitor actively expanding into offline business.”
Alibaba, which smashed its 24-hour shopping festival sales tally from last year with total takings of 168 billion yuan (US$25.3 billion), this week made a push into India’s mobile gaming market with a joint venture by two of its units. It is also backing start-ups in bicycle sharing and electric cars, and will provide Malaysia with its City Brainplatform to help manage traffic and make other municipal functions more efficient.
The e-commerce company bought a 74 per cent stake in Intime Retail Group, a department store chain, in January last year, and an 18 per cent stake in supermarket chain operator Lianhua at the end of May. It also launched its first offline store in Hangzhou, named House Selection.
As for Wanda, the property giant controlled by billionaire Wang Jianlin, the deal represents an enlisting of China’s internet companies to help finance his HK$30 billion (US$3.8 billion) plan to take his Hong Kong-listed flagship private.
Wang, once the wealthiest businessman in China, had been trying since September 2016 to fund the delisting of Wanda Commercial Properties from the Hong Kong exchange, aiming to list it in Shanghai for a higher valuation.
“I think the property developer is mitigating the political risks by setting partnership with China’s biggest internet companies and stepping into online business,” said Zhao at Cyzone. “The deal is like a swap of resources among China’s top companies. Alibaba and Tencent has money and are seeking investments,” he said. “Wanda has brick-and mortar stores, which can well fit for their offline layout strategies.”
Source: http://www.scmp.com/tech/china-tech/article/2131129/tencent-bets-chinas-shopping-malls-can-be-fashionable-again-it-leads