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Tencent Sets Up Joint Venture To Compete In Chinese Retail Market

The development sounds the bugle for the retail war between Tencent and its tech rival Alibaba.

Nov 3, 2018 by The Passage Team
Tencent Sets Up Joint Venture To Compete In Chinese Retail Market

China’s tech giant Tencent (腾讯) along with retail chain majors Yonghui Superstores(永辉) and Parknshop China(百佳中国), recently formed a USD 170 million joint venture named ParknShop Yonghui .

According to the agreement, Yonghui, Parknshop China and Tecent invested USD 89 million in equity, USD 72 million in equity and cash and USD 17million in cash, in exchange for 50%, 40%, and 10% stakes, respectively.

Although Tencent has kept its stakes low, the tech giant will have one position in the joint venture’s board of directors.

Tencent which has in the past described itself as a “servant” of the sector, said it has no intention to develop retail business itself but to help other retail sellers, a report by media outlet 36 Kr says.

However as a co-founder of the joint venture, Tencent is no longer a “servant” but an “observer” who takes charge of the smart retail game and shows huge ego, the media outlet observed.

The partnership between the three companies would help Yonghui further develop its business in Guangdong province, as well as boost Yonghui and ParknShop’s businesses in Guangdong, according to Yonghui’s statement.

ParknShop Yonghui will focus on Guangdong retail market, expand its stores based on more than 70 shops that ParknShop and Yonghui have in total in Guangdong.

Zhang xuanning, the founder of Yonghui, said the joint venture’s annual revenue target is USD 1.44billion.

“Tencent and Yonghui have been very close partners and have together explored opportunities in retail,” said Tian Jiangxue, vice general manager of Tencent’s smart retail strategic cooperation department.

Tencent would exert its social media, mobile payment, cloud computing, big data, artificial intelligence services etc to add technology power to ParknShop Yonghui.

Yonghui started its business selling fresh vegetables, fruits and seafoods. Yonghui currently operates more than 1,000 supermarkets in more than 200 cities in China.

ParknShop is a member of the AS Watson Group, the world’s largest health and beauty retail group and the retail arm of Hong Kong, which was found in 1841 and formerly owned by tycoon Li Ka-shing. ParknShop has more than 50 shops in Guangdong province.

The development also sounds the bugle for the retail war between Tencent and its tech rival Alibaba(阿里巴巴). However the strategy adopted by the two behemoths seems different.

Alibaba is more likely to invest capital to “control” a retail chain, whereas Tencent tends to provide tools to contend for the retail market, a 36 Kr report says.

(With inputs from Diqing Liu, an intern with The Passage)

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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