Tencent Holdings Ltd, which is currently the biggest listed technology company in Asia, will collaborate with real estate giant Dalian Wanda Group and the biggest Chinese search engine – Baidu Inc to tap Chinas vast e-commerce market. The companies are joining forces in a $814-million e-commerce joint venture to challenge Alibaba Group Holding Ltd, which dominates the flourishing Chinese online shopping market.
The director of the China E-Commerce Research Center Mr Cao Lei commented for Bloomberg: “It’s a very interesting battle to watch – three top rich people join hands to challenge another bigger billionaire. The new venture will not be an immediate challenge to Alibaba. Rome can’t be built in a day.”
Tencent Holdings Ltd and Baidu Inc. will each hold a 15% stake in Wanda Ecommerce, set to be registered in Hong Kong. The remaining 70% of the entity will be owned by the privately-held Dalian Wanda.
Dalian Wanda Group is currently the largest commercial land developer in China. According to the companys statement, the joint venture is estimated to 5 billion yuan ($813 million).
The collaboration between the three companies reflects optimistic beliefs there is room for rivalry in the Alibaba-dominated Chinese online shopping market, with the e-commerce giant currently transacting more goods than Amazon.com Inc. and eBay Inc. combined. According to McKinsey & Co., Chinas online shopping market, considered to be the fastest growing one in the world, is expected to expand more than three times to $395 billion in the period between 2011 and 2015.
As reported by the Financial Times, the Chief Executive Officer of the new venture – Mr. Dong Ce revealed in a statement that the partnership between Tencent Holdings Ltd, Baidu and Wanda is to create “the worlds largest O2O [online to offline] ecommerce platform”.
The joint venture will set up e-commerce services in all 107 commercial real estate properties of Dalian Wanda. The three companies that are joining forces against Alibabas competition are to share their user and membership systems, plus their WiFi services. In addition, payment and internet finance products will be created, and the companies are to establish a “membership credit alliance”.
Tencent Holdings Ltd fell by 1.02% on Friday in Hong Kong to close at HKD 126.50 per share, marking a one-year change of +74.63%. The company is valued at HKD 1.20 trillion.