Chinese internet giant Tencent Holdings Ltd said on Monday it would lead an $863 million investment in apparel platform Vipshop Holdings Ltd , upping its rivalry in retail with Alibaba Group Holding Ltd.
Tencent will invest $604 million in exchange for a 7 percent stake in Vipshop, while e-commerce firm JD.com Inc – a long-standing ally – will invest $259 million for a 5.5 percent stake, the two firms said in a statement.
The companies did not clarify why the cost of Tencent’s purchased stock was higher than JD.com’s. Neither company responded to requests for comment on Monday afternoon.
The deal extends a recent push by Tencent into Alibaba’s home turf of retail, where the firm hopes to leverage its messaging service WeChat and its online payment systems to drive shopping demand.
Martin Lau, Tencent’s President, said the tie-up would bring Vipshop Tencent’s “audiences, marketing solutions, and payment support” to help tap China’s rising middle class. Tencent’s WeChat has nearly a billion users.
The looming retail battle reflects a wider, long-running stand-off between Tencent and Alibaba, who have made competing investments in areas as diverse as bike-sharing apps, food delivery and gaming.
“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.”
He added, however, that such deals were difficult to turn into successful ventures.
“It remains to be seen how they will be integrated successfully, (and) whether or not these will actually be effective investments.”
Learn More about Forex Signals