Chinese Internet giants Tencent and Baidu are teaming up with conglomerate Wanda to form an RMB 5 billion (about $814 million) e-commerce joint venture in a bid to challenge Alibaba’s dominance. Wanda, a real estate and movie theater chain group, will hold a 70 percent stake, while Tencent and Baidu will each hold 15 percent.
The companies are competing for a bigger slice of China’s e-commerce market, which is the largest in the world and still growing rapidly. According to iResearch, online retail sales in China will grow 45.8 percent to RMB 2.76 trillion (about $446.6 billion) this year. A PricewaterhouseCoopers poll showed that one in seven Chinese shop online at least once per day.
The partnership will promote Tencent’s online payment platforms, including TenPay and Weixin Payment, which are competitors to Alibaba products like Alipay. TenPay and Weixin Payment will now be the preferred payment method for transactions across all of Wanda’s businesses, including its movie theaters. Tencent will also benefit from having access to movie, TV, and online dramas that Wanda owns.
In a joint statement, the companies said “the JV underscores Tencent’s commitment to enriching our O2O ecosystem and delivering superior experience to our users through connecting them with goods, services, and businesses.” Online-to-offline purchases are especially important to Tencent as it seeks to capitalize on the 396 million users of its popular messaging platform WeChat.
The companies added “the three partners will further deepen collaboration on initiatives such as traffic sharing, media and advertising, resources sharing, membership benefits, payment and internet finance, big data, etc.”
The JV is the latest of several moves that Tencent has made to challenge Alibaba as the latter moves toward its highly anticipated IPO this fall. For example, in May it spent $187 million for a 11.3 percent stake in NavInfo, one of China’s largest mapping companies. The deal was notable because Alibaba recently bought mobile mapping provider AutoNavi Holdings, one of NavInfo’s main competitors, which powers its location-based e-commerce services.
Before that, Tencent took a 15 percent stake in and formed a strategic partnership with JD.com. JD.com is much smaller than Alibaba, but it is China’s second-largest e-commerce company and rapidly growing.
The JD.com deal came after Tencent launched a new mobile open platform initiative to attract developers and invested $195 million in logistics firm China South City.