To strengthen foothold in Chinese e-commerce market, Tencent has bought stake in the logistics provider; will pay HK$2.20 each for 680.3M new shares
With an aim to strengthen its foothold in the Chinese e-commerce space, Tencent Holdings has announced that it has made an investment of HK$1.5 billion (US$193.45 million) in Chinese logistics provider, China South City Holdings.
Paipai.com is Tencent’s e-commerce platform which went into service on September 12, 2005 and was publicly launched on March 13, 2006. Tencent, as a part of its “Online Life” strategy, takes full advantage of Tencent’s QQ and other services, for Paipai.com.
This move will provide a logistics and trade delivery network to Tencent that will enable it to go head-on against archrival Alibaba Group.
Tencent also owns Tenpay, an online payment application and services.
Tencent will pay HK$2.20 each for 680.3 million new shares in Shenzhen-based China South City, a price that is 1.4 percent higher than the Jan. 13 closing price. Tencent has an option to buy 244.8 million more new shares at HK$3.50 each, according to China South City’s filing to Hong Kong’s stock exchange yesterday.
Tencent will also work with the logistics provider to assist SMBs keen to go online, along with using the partnership to grab a bigger share of the country’s 608 million online shoppers.
Competition heats up
China’s e-commerce market is expanding exponentially and so is the competition between Alibaba and Tencent. According to a 2013 McKinsey report, online retailing in China more than doubled each year from 2003 to 2011 and is projected to more than triple to US$395 billion in 2015 from 2011.
Alibaba, last week, said it would return 70 percent of sales generated from mobile games to developers, in a move to target online gaming leader, Tencent, which uses its instant messaging app WeChat to deliver mobile games to its 270 million users.
To catch-up with Alibaba, Tencent recently invested in China cab booking app Didi Taxi and began allowing users to pay fares using its payment system Weixin Payment. Not to mention, it also acquired stake in Activision Blizzard Inc. (ATVI) in October.