Ma Huateng partners with Wanda
When Chinese people find themselves racking their brains about a challenging problem, they often encourage one another by saying, “Three cobblers with their wits combined is stronger than one Zhuge Liang!”
The idiom means that – by banding together to come up with a solution – ordinary folk can rival a highly intelligent man like Zhuge, China’s most renowned strategist (see WiC249).
Wang Jianlin, chairman of property conglomerate Dalian Wanda, seems agree that it takes three wise men to surpass one. Last week, he announced that Wanda is joining forces with Baidu and Tencent to create an $800 million e-commerce joint venture. Although none of the partners said so explicitly, there is no doubt that the venture is aimed at challenging Alibaba’s stranglehold over the e-commerce market.
The timing of the news is interesting too. That’s because a day before the announcement of the trio’s joint venture, Bloomberg declared Jack Ma China’s richest man. The chairman of Alibaba Group, which is planning what could be the largest initial public offering in US history, is reportedly worth $21.8 billion. His assets include a 7.3% economic interest in China’s largest e-commerce business and almost half of Alipay, a separate online-payment service that previously hadn’t been included in his net worth calculation.
That also means he is $5.5 billion richer than Ma Huateng, the founder of Tencent, China’s largest internet company by market capitalisation (as of today). Robin Li, the founder of search engine Baidu, ranks third. But last September, Forbes, which publishes a rival billionaire index, declared Wang as China’s richest man.
“It’s a very interesting battle to watch – three top rich people join hands to challenge another bigger billionaire,” Cao Lei, director of the China E-Commerce Research Centre, told Bloomberg.
Back to the joint venture: Baidu and Tencent will each hold 15% of Wanda Ecommerce, with the remaining 70% owned by Wanda. The three companies will hope to leverage shoppers at Wanda’s nationwide chain of 107 malls, as well as cross-marketing promotions and memberships to the hundreds of millions of people who use Baidu’s online search and Tencent’s social networking and payment processing services. “At the moment, there isn’t a true online-to-offline platform,” Wang told a press conference (although by partnering with Sinopec too, Tencent is also clearly hedging its bets, see Talking Point). “Based on this, the three of us discussed setting up such a platform, which we believe will become the biggest pie in the e-commerce business… This is just the beginning.”
Alibaba is making a similar push into online-to-offline ventures, having agreed in March to pay nearly $700 million for a minority stake in Intime Retail Group, which operates 36 department stores across China.
Certainly Wanda needs to adjust its business strategy. The largest commercial property firm in China, it has seen traffic slowly declining as more shoppers go online. If this continues, Wanda Plaza, the company’s flagship malls, will become the “showroom” for shoppers, where they try out products in stores and then buy them for less online, warns the China Economic Times.
What Wanda needs is online traffic and data processing capabilities, and these are what Tencent and Baidu could provide, Beijing News reckons. Tencent’s QQ and WeChat, which boast hundreds of millions of users, are hugely powerful when it comes to bringing in online traffic. Meanwhile, Baidu has a distinct advantage in large data processing thanks to its search, maps, and group-buying services.
Wanda Ecommerce also seems to suggest that Wang has had a change of heart and is no longer as dismisive about the threat posed to the traditional retail sector by internet shopping. In 2012, he offered a highly publicised bet to Jack Ma that online consumption wouldn’t surpass 50% of total retail sales within the next decade. If it did, Wang said he would give the internet tycoon Rmb100 million ($16.29 million). If not, he wanted the same sum from Ma himself.
Ma may now regret not accepting the wager. If he had, it could further cement his position as China’s richest man…
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