BEIJING: Tencent Holdings, the company behind WeChat, is entering the retail e-commerce field through a partnership with online retail challenger JD.com to invest heavily into Vipshop, an online discount retailer for fashion brands in China.
The two companies will invest a combined US$863 million in cash into the retailer, the South China Morning Post reported. Such a deal gives Vipshop incredible access to some of the investors’ largest and most potent online properties.
Tencent will allow Vipshop to access data from its Weixin (WeChat) Wallet, providing the retailer with online buyer traffic from Tencent’s huge messaging and payments platform.
Meanwhile, JD.com will give Vipshop access to the main pages of its mobile app as well as its Weixin Discovery shopping site. In addition, China’s second largest online retailer will help to achieve certain gross merchandise value targets through its own platform.
For JD.com, the attraction is Vipshop’s position among hard to reach consumer segments. In comments reported by the FT, the site’s CEO, Richard Liu, said the deal would help his company “further extend the strong inroads that we have made with female shoppers, and will expand the breadth and reach of our fashion business”.
Martin Lau, president of Tencent added that broader trends had informed the decision. “We already see substantial demand from our users to discover, discuss and purchase branded apparel in our applications, and we believe that connecting our users more deeply to products on Vipshop’s platform will enrich their online experiences while benefiting Vipshop.”
The larger Tencent will invest $604m, while JD will invest $259m, bringing each stakes of 6% and 5.5% in Vipshop, respectively.
Both companies have been busy expanding into new areas of retail. On Friday, Reuters reported that Tencent would invest 4.2bn yuan ($636m) in physical Yonghui superstores, in a move widely read to reflect Tencent’s hunger for physical retail environments, also coveted by rival giant Alibaba.
Meanwhile, last week, JD.com announced a partnership with a Hong Kong-listed developer to build hundreds of self-service convenience stores and thousands of medicine dispensers across China, according to the FT.
The interest from big Chinese players in automated physical retail has as much to do with rising labour costs (a worry for price-sensitive online retailers) as with providing a great customer experience with flashy technologies such as facial recognition for payments.
Sourced from South China Morning Post, Financial Times, Reuters; additional content by WARC staff