JD.com Inc and Tencent Combine Forces in China

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Two dominant leaders in the business world within China are combining forces in an effort to overtake Alibaba Group, the leading e-commerce company in China.

jd-tencentJD.com Inc is a leading e-retailer that provides direct-to-consumer products, while Tencent Holdings Limited, is a huge internet company within China. JD has acquired two e-retail sites from Tencent Holdings Limited. They have a major stake in wanggou.com and PaiPai.com. JD also acquired a small stake in Yixun.com.

In this deal, Tencent will be promoting JD via their mobile messaging platforms, which include WeChat and QQ instant messenger. In addition, Tencent will be purchasing a 15% stake in JD that will amount to the company paying around US$214.6 million for the deal. Once JD goes public, Tencent will also purchase another 5% stake at the IPO price.

Current stock trends for JD.Com, Inc via http://finance.yahoo.com/echarts?s=JD+Interactive#%7B%22scale%22%3A%22linear%22%7D

Current stock trends for JD.Com: Source

JD is considered to be the top Internet Retailer according to the rankings of 2014.

The company is located in Beijing. The China 500 has the company as ranking #5 with their e-retail businesses.

According to the founder, Charimen and CEO of JD, Richard Liu, the partnership is going to allow JD to provide a shopping experience of a high quality and be enjoyable. It will also aid in helping to increase the mobile and internet sales of the company.

Those who have been monitoring the deal also see great value in the coming togetherr of these two businesses. According to an analyst from China E-Commerce Research Center, Mo Daiqing, “After this deal, JD’s value at IPO could increases from around US$9 billion before to around US$11 billion.” He says “Also, JD could get a lot of traffic from Tencent’s social media platforms, especially from Wechat.”

With the social media platforms Tencent is bringing to JD, there could be a huge increase in the audience reach.

Chart courtesy of http://www.statista.com/statistics/255778/number-of-active-wechat-messenger-accounts/

Chart: Source

The users with the QQ instant messaging app offered by Tencent are even larger than their WeChat users.

Chart courtesy of http://www.statista.com/chart/2575/active-users-of-wechat-qq-and-qzone/

Chart: Source

The number of users that JD could be reaching are astronomical. This is the main reason why so many are interested to see how the combination will affect Alibaba Group, who have declined to comment on this new partnership.

Alibaba Group has long been the go to e-commerce company that has dominated the web. They have announced plans to go public, but no date has been set. The company has also made many investments in mobile companies, such as taking a 72% stake in AutoNavi Holdings Ltd, for around US $1.13 billion only a month ago.

Right now, JD and Tencent are no where near the operational status of Alibaba Group. However, this new partnership could prove to be one which results in more growth for both companies. JD can focus more on their e-commerce, while Tencent can focus on their social platforms more fully.

About Author

Social Brand Watch (SBW) is a collection of experts in digital, mobile and social media in China. SBW was created to complement Resonance's China Social Branding Report, a bi-weekly report focusing on modern marketing methods of the world's top brands in China.

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