The e-Commerce market has been ambushed by stiff competition from various online retailers some of which have continued to invest in it. Tencent Holdings Ltd (OTCMKTS:TCEHY), for example, has entered into a $604 million deal, which will result in the purchase of shares of Chinese online retailer Vipshop. JD.Com Inc (ADR) (NASDAQ:JD) will pump another $259 million into Vipshop bringing the total investment to $863 million.
The duo’s arrangement will give a seven percent and a 5.5 percent of the premium stock in Vipshop to Tencent and JD.com respectively. The move is also expected to take on Alibaba, which is the largest e-commerce firm in China.
Tencent and JD.com have together worked on frontier investments
The two companies have the synergies to make the investment valuable. In any case, each of them has previously worked on frontier investments. JD.com has been in Indonesia and Thailand while Tencent has experienced the Southeast Asia markets.
The investment is expected to give a massive boost to the Vipshop, one of the best-known online discount retailers for brands. It will also benefit from Tencent’s provision of a dedicated spot on Weixin Wallet; the Chinese version of its popular WeChat app
In response to the strategic alliance, Tencent President Martin Lau says, “We look forward to providing Vipshop with our audiences, marketing solutions……………… to help the company provide branded apparel and other product categories to China’s rising middle class.”
The deal is an extension of a heightened period of investment for Tencent
Lau outlines that there is substantial demand for branded apparel, thus being part of Vipshop’s platform will help in enriching the user’s online experiences. Apparently, Tencent has been investing heavily in 2017 to a point of becoming Asia’s first $500bn company.
The company has also invested in other well – known entities such as Spotify, Tesla Inc. (NASDAQ:TSLA), and Snap. It has also closed deals with the likes of lunar drones and asteroid mining. Meanwhile, Alibaba Group Holding Ltd (NYSE:BABA) has every reason to get worried about Tencent’s emerging dominance, which is likely to have a long-term negative impact on innovation in China’s retail business.