To challenge Alibaba, China's biggest property developer Wanda to set up $800 mn e-commerce JV

Beijing: China’s biggest property developer Wanda Group said it will set up an e-commerce venture at acost of over USD 800 million with two other Internet giants, Baidu and Tencent, in a challenge to industry leader AlibabaGroup ahead of its debut in the US stock market.

The three companies will initially invest 5 billion yuan (USD 814 million) and the investment will reach 20 billion yuan within five years, Wanda chairman Wang Jianlin said during the contract signing ceremony. Wanda will hold 70 per cent stake in the joint venture, the name of which is still unknown. Baidu and Tencent will hold 15 per cent each, state-run Xinhua news agency reported.

The e-commerce company will be registered in Hong Kong. After a test run this year, its online services will be formally launched next year.

Alibaba, the country’s largest e-commerce company, is poised to launch what is potentially the world’s largest-ever technology IPO in the United States.

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Analysts say the initial public offering might value Alibaba between USD 150 billion and USD 200 billion. Alibaba founder Jack Ma, whose assets were valued at USD 21.8 billion, is regarded as China’s richest man. He is USD 5.5 billion richer than Ma Huateng, the founder of Tencent Holdings. Robin Li, founder of the search engine Baidu, ranks third.

Wanda owns 94 Wanda Plazas and 60 luxury hotels in China. Tencent, China’s largest Internet company by market value and Baidu, China’s largest search engine, have both forayed into China’s online retail space in the past but neither have managed to crack Alibaba’s hold over the country’s growing e-commerce market.

Alibaba, had a gross merchandise volume of USD 248 billion in 2013 on its three major trading platforms, accounting for78.5 per cent of the country’s online retail market, says a report by market information provider Analysys International.The alliance of the three most powerful private companies in China is widely seen as an approach to challenge Alibaba’sdominant position in the e-commerce market.

“The online-offline integration is an inevitable trend for future business terminals and e-commerce companies,” said DongCe, CEO of the joint venture. Tencent’s vast number of users is a cutting-edge for the new venture.

Wanda hopes these users will become customers at its shopping malls, movie theatres and hotels through this new e-commerce platform.

As of June 30, monthly active users on Tencent’s QQ instant messaging service reached 829 million while its mobile social platform Wechat boasted of 438 million active users. The tie-up with the two IT giants will turn Wanda into the world’s largest online-to-offline(O2O) platform, according to Dong.

Wanda will launch e-commerce services in all 107 Wanda Plazas, including those scheduled for opening, by the end of2014. By 2015, all Wanda plazas, hotels and resorts will be equipped with e-commerce services, said Dong, predicting theWanda e-commerce membership will exceed 40 million this year and 100 million next year.

Xue Shengwen, a senior researcher with industry research firm CIConsulting said the O2O is a market Alibaba has yet totap and is worth trillions of yuan. The alliance of the three giants will change the landscape of China’s e-commerce market,Xue added. China is the world’s most populous Internet market, with more than 600 million people online. McKinsey, a consulting firm, has said online shopping might triple from 2011 levels to USD 400 billion a year by 2015.

PTI