Alibaba, Tencent rally troops amid retail battle

The logo of Alibaba Group is seen during the fourth World Internet Conference in Wuzhen, China, on Dec 3, 2017.
The logo of Alibaba Group is seen during the fourth World Internet Conference in Wuzhen, China, on Dec 3, 2017. PHOTO: REUTERS

SHANGHAI • China's tech giants Alibaba Group and Tencent are on a retail investment binge, forcing merchants to choose sides amid a battle for shoppers' digital wallets.

Since the start of last year, the two companies have, between them, spent more than US$10 billion (S$13.2 billion) on retail-focused deals, boosting their reach online and in brick-and-mortar stores.

The aggressive drive, supported by large cash piles and soaring share prices, is part of a battle to win over consumers and store operators to the two firms' competing payment, logistics, social media and big data services.

The result: fewer and fewer retailers left without allegiance to either Tencent or Alibaba.

"The retailers in the brick-andmortar world are very worried. They have to take a side," said Mr Jason Yu, Shanghai-based general manager of market research firm Kantar Worldpanel. "Otherwise, they will be eaten alive in the future."

Alibaba is China's top e-commerce player, and its affiliate Ant Financial leads in mobile payments. Tencent's strengths lie in social media, digital payment and gaming. It also has a major stake in the second-largest online retailer, JD.com.

Tencent and JD.com have a growing range of allies, including French grocer Carrefour and United States retail giant Walmart.

Tencent has also bought a stake in Yonghui Superstores, apparel retailers Vipshop and Heilan Home, and mall operator Wanda Commercial. This month, it snagged a strategic tie-up with grocer Bubugao.

In the other corner is Alibaba, which has invested even more heavily in Suning.com, Intime Retail, Sanjiang Shopping Club, Lianhua Supermarket, Wanda Film, and Ikea-like home improvement store Easyhome.

Key to the battle is China's nearly US$13 trillion mobile payment market, where Alibaba and Tencent are going head-to-head. Alibaba took a 33 per cent stake in Ant Financial this month ahead of an expected mega initial public offering.

Ant operates China's top mobile payment platform Alipay, while Tencent's payment system on its hugely popular Weixin chat app is catching up fast. Both firms are also making a big push in cloud computing and data.

"I think, for payment, (the retail push) is a very critical part because it's almost a gateway," said Mr Yu.

Brick-and-mortar stores in China account for about 85 per cent of retail sales, creating a huge lure for tech giants. "That's the pot that Alibaba, JD.com and even Tencent want a share of," Mr Yu added. "That's... where they can look for future growth."

In return, the physical stores get access to payment systems, logistics networks and other services – not to mention the reams of data on consumers that the tech firms control.

Alibaba invested US$486 million this month in a retail-focused big data firm, saying the deal meant it could better "help brick-and-mortar retailers succeed in the digital age".

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 20, 2018, with the headline 'Alibaba, Tencent rally troops amid retail battle'. Print Edition | Subscribe