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$10 Billion Chinese Retail Market Battle Puts Alibaba And Tencent Head To Head


02/19/2018


$10 Billion Chinese Retail Market Battle Puts Alibaba And Tencent Head To Head
Two of China’s largest tech giants - Alibaba Group Holding Ltd and Tencent Holdings Ltd, are at loggerheads to win over market share and customers and is investing heavily in infrastructure. The combined market value of the two companies is $1 trillion.
 
The reach of the companies – both online and through the brick and mortar stores have been boosted as the two companies have invested over $10 billion collectively on retail-focused deals in the last one year or so.
 
The two companies are on a war path to win over customers for their payment, logistics, social media and big data services offered by both companies. Th e investments have been driven by huge cash and increasing share prices.
 
A consequence of this is that retailers have had to choose between one of the two companies and there are very few who are left without an allegiance to one of the two companies.
 
“All of the retailers in the brick-and-mortar world are very worried. They have to take a side,” said Jason Yu, Shanghai-based General Manager of market research firm Kantar Worldpanel. “Otherwise they are afraid they will be eaten alive in the future.”
 
While the top e-commerce platform in China is with Alibaba, its mobile payments wing Ant Financial is a leader in its segment. For rival Tencent, social media, digital payment and gaming are its strengths. The company also owns a large chunk in JD.com, the second largest online player in China.
 
Tencent and JD.com posses strong backing from the likes of French grocer Carrefour SA where an investment from Tencent has been announced where as U.S. retailer Walmart has taken up share in JD.com.
 
Stakes in mall operator Wanda Commercial, apparel retailers Vipshop Holdings Ltd and Heilan Home and Yonghui Superstores Co Ltd, are also owned by Tencent. The company also signed a strategic tie up with grocer Bubugao this month. Therefore, the company enjoys substantial strategic support.
 
On the other hand, rival Alibaba has made large investment in companies like IKEA-like home improvement store Easyhome, Wanda Film, Lianhua Supermarket, Sanjiang Shopping Club, Suning.com and Intime Retail.
 
The $13 trillion market for mobile payments in China is at the center of the war between Tencent and Alibaba where both the companies are fighting out fiercely with one another. Just before an anticipated IPO of Ant Financial this month, a 33 per cent stake in the company has been taken up by its parent company Alibaba.
 
While the mobile payment system of Tencent on its very popular chat app Weixin is becoming popular, the opt mobile payment platform in China is owned and operated by Ant. Cloud computing and data are the other two areas where both the companies are pushing hard to make a mark.
 
“I think for payment (the retail push) is a very critical part because it’s almost a gateway,” said Yu. Brick-and-mortar stores in China account for about 85 percent of retail sales, creating a huge lure for tech giants.
 
“That’s the pot that Alibaba, JD.com and even Tencent want a slice of,” Yu added. “That’s the majority of the business where they can actually look for future growth.”
 
(Source:www.reuters.com)