Tencent Holdings has announced its intention to lead an $863 million investment round in apparel platform Vipshop Holdings. The investment will see Tencent throw in $604 million in return for a 7 percent stake in Vipshop.
The round will also see participation from JD.com, which will invest $259 million for a stake of 5.5 percent. JD had previously held an undisclosed stake of roughly 2.5 percent.
The move comes as Tencent is increasingly stepping up its retail game against China’s resident unstoppable giant Alibaba. Tencent is the operator of WeChat and its associated payment system WeChat Pay. The hope, on Tencent’s end, is to leverage its massive popular payments platform into greater shopping demand. Tencent’s WeChat has nearly a billion users.
“Right now in the Chinese market we have two internet powers,” said Weiwen Han, managing partner for Greater China at Bain & Company. “Investments will either fall into the Alibaba or Tencent camp. It remains to be seen how they will be integrated successfully, (and) whether or not these will actually be effective investments.”
Alibaba’s Tmall and Taobao platforms dominate online commerce, and Alibaba has made no secret of the fact that its next move is on brick and mortar commerce. Thus far the firm has pushed around $10 billion into its real-world commerce expansion.
Tencent is Asia’s most valuable company with a market capitalization of $473 billion — and has plans to invest 4.2 billion yuan ($636 million) for a 5 percent stake in supermarket operator Yonghui Superstores Co Ltd (601933.SS). It is already a major stakeholder in JD.com.