Alibaba, Tencent rally troops amid $10 billion retail battle

Lianhua Supermarket Holdings Co

19/02/2018 09:04

By Adam Jourdan 
    SHANGHAI, Feb 19 (Reuters) - China's tech giants Alibaba 
Group Holding Ltd  BABA.N  and Tencent Holdings Ltd  0700.HK , 
worth a combined $1 trillion, are on a retail investment binge, 
forcing merchants to choose sides amid a battle for shoppers' 
digital wallets. 
    Since the start of last year, the two companies have between 
them spent more than $10 billion on retail-focused deals, 
boosting their reach online and in brick-and-mortar stores.  
    The aggressive drive, supported by large cash piles and 
soaring share prices, is part of a battle to win over consumers 
and store operators to the two firms' competing payment, 
logistics, social media and big data services.     
    The result: fewer and fewer retailers left without 
allegiance to either Tencent of Alibaba.     
    "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." 
     
     
    Alibaba is China's top e-commerce player and its affiliate 
Ant Financial leads in mobile payments. Tencent's strengths lie 
in social media, digital payment and gaming. It also has a major 
stake in the second-largest online retailer, JD.Com  JD.O .  
    Tencent and JD.com have a growing range of allies, including 
French grocer Carrefour SA  CARR.PA , which has announced a 
potential investment from Tencent, and U.S. retail giant Walmart 
 WMT.N , which has a stake in JD.com.  
    Tencent also bought a stake in Yonghui Superstores Co Ltd 
 601933.SS , apparel retailers Vipshop Holdings Ltd  VIPS.N  and 
Heilan Home  600398.SS , mall operator Wanda Commercial, and 
this month snagged a strategic tie-up with grocer Bubugao. 
    In the other corner is Alibaba, which has invested even more 
heavily in Suning.com  002024.SZ , Intime Retail, Sanjiang 
Shopping Club  601116.SS , Lianhua Supermarket  0980.HK , Wanda 
Film  002739.SZ  and IKEA-like home improvement store Easyhome. 
     
     
    Key to the battle is China's nearly $13 trillion mobile 
payment market, where Alibaba and Tencent are going 
head-to-head. Alibaba took a 33 percent stake in its payment 
affiliate Ant Financial this month ahead of an expected mega 
IPO.         
    Ant operates China's top mobile payment platform, Alipay, 
while Tencent's payment system on its hugely popular Weixin chat 
app is catching up fast. Both firms are also making a big push 
in cloud computing and data. 
    "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." 
    In return, the physical stores get access to payment 
systems, logistics networks and other services - not to mention 
the reams of data on consumers that the tech firms control. 
    Alibaba invested $486 million this month in a retail-focused 
big data firm, saying the deal meant it could better "help 
brick-and-mortar retailers succeed in the digital age." 
 
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Alibaba and Tencent retail investments IMG    http://tmsnrt.rs/2BucWsh 
China online payment IMG    http://tmsnrt.rs/2syKYsq 
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 (Reporting by Adam Jourdan 
Editing by Gerry Doyle) 
 ((adam.jourdan@thomsonreuters.com; Reuters Messaging: 
adam.jourdan.thomsonreuters.com@reuters.net)) 
 
Keywords: CHINA RETAIL/TECH