In 2012, Wang Jianlin and Jack Ma appeared together on a TV show. Ma told the founder of China’s largest developer of commercial property that shops and malls were a thing of the past. Wang did not take this prediction well and he made the now-famous wager that if, in 10 years time, online sales become more than half of total retail sales, he would give Ma Rmb100 million (and vice versa if it had not happened).
Wang later claimed that the bet was for fun and shouldn’t be taken seriously. But he had clearly grasped the threat that online sales were posing to his property business and in 2014 Wanda announced that it had joined forces with internet giants Baidu and Tencent to extend its reach into e-commerce too.
Enter Feifan, the conglomerate’s online-to-offline (O2O) retail platform (Feifan means ‘extraordinary’ in Chinese). Wang claimed that Wanda was going to invest up to Rmb20 billion ($2.81 billion) to build up a web platform that combined the developer’s shopping centres with Baidu’s maps and Tencent’s WeChat social network.
Six years on, Jiemian has reported that Wanda is quietly shutting down the online platform and concluding the last chapter in the company’s foray into e-commerce.
Industry observers say that Feifan’s demise has been a long time coming. After it went live in 2015, the platform failed to convince enough businesses to get on board. Another reason that Feifan failed to get traction was because Wang struggled to fully embrace the online business model. Feifan did not offer a delivery option for the goods sold on its platform, for instance. Instead consumers had to pick up their products from stores.
Baidu and Tencent, which had each owned 15% in the venture, offloaded their shares, rendering Feifan a wholly-owned subsidiary of Wanda Internet Technology Group.
“I don’t think all three parties were clear about the timeline and the extent of their cooperation. Each wanted to protect their own interests. There was a lot of resistance and it was impossible to realise the full potential,” claims ThePaper.cn.
Wang refused to give up, changing tack to focus on internet finance. Feifan issued smart cards to consumers that tracked their spending and the data collected was used as the basis for credit-checking. Wang had high hopes for the new model, claiming that the subsidiary would go public by 2020.
But these ambitions never materialised either and Wang reshuffled Feifan’s management after a series of poor results.
According to Wanda’s annual report, Feifan contributed Rmb5.9 billion in revenues as of 2017. But Wang’s main property unit, Dalian Wanda Commercial, raked in Rmb112.5 billion over the same period, showing how Feifan’s contribution to the property conglomerate was negligible at best.
“It has people. It has money. It has resources. But no good results,” China Entrepreneur concluded of the e-commerce effort. “Wanda’s obsession with e-commerce reflects a traditional company’s worries and expectations about the internet. The ups-and-downs it has experienced are typical examples of other businesses that have been upended by the rise of online sales.”
Wang has admitted that he should have pulled the plug on Feifan earlier. “I gave Qu Dejun [head of Wanda Internet Technology] too much money. I wish I hadn’t put in so much money at the beginning and put a cap on the amount of investment,” he complained in 2017.
Wanda is closing down Feifan at a time when the conglomerate needs to refinance about Rmb39.8 billion ($5.7 billion) of its bonds (including those of its subsidiaries). That is more than a third of its outstanding notes, the highest proportion for any of the country’s top 25 firms. Wang is also having to navigate a treacherous trading environment. Wanda is China’s largest cinema operator at a time when theatres have stayed largely shut because of the Covid-19 crisis.
Its ownership of the struggling US cinema chain AMC is another deadweight and Wanda Commercial, the company’s biggest revenue generator, took a major hit during the pandemic when the developer waived or delayed rents for many tenants.
Also perhaps weighing on Wang’s mind? That bet with Ma comes due in eighteen months…
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