China's Tencent, invest $863 million in online retailer Vipshop

Lester Mason
December 19, 2017

Shares of Yonghui Superstores jumped by the daily limit of 10 per cent within half an hour of the start of trading on the Shanghai bourse on Monday after Tencent Holdings agreed to buy a 5 per cent stake worth 4.22 billion yuan (US$639 million) in the Chinese supermarket chain last week, upping the ante against Alibaba in the bricks-and-mortar retailing scene.

"Tencent and JD need this assistance given Alibaba's spectacular execution in 2017", said Blue Lotus Capital Advisors founder Eric Wen. Tencent will contribute a $604m stake in exchange for seven percent equity in Vipshop, while will pay $259m to up its shareholding in the company to 5.5 percent, up from 2.5 percent.

Once known mainly as a video games distributor, Tencent has grown WeChat into China's premier social media platform.

Further, the deal marks the latest push by Tencent to dent Alibaba's retail empire.

"Tencent needs to go from the backstage to the frontstage and that's what they've done". After the end of the lock-up period, for so long as Tencent and hold approximately 12% and 8%, respectively, of Vipshop's total issued shares, or otherwise by mutual agreement with Vipshop, they will maintain director and board observer rights. Such a deal gives Vipshop incredible access to some of the investors' largest and most potent online properties.

The interest from big Chinese players in automated physical retail has as much to do with rising labour costs (a worry for price-sensitive online retailers) as with providing a great customer experience with flashy technologies such as facial recognition for payments. Under these agreements, Tencent will grant Vipshop an entry on the interface of Weixin Wallet enabling Vipshop to utilise traffic from Tencent's Weixin platform, and will grant Vipshop entries on to both the main page of's mobile application and the main page of its Weixin Discovery shopping entry.

JD will also grant Vipshop a potentially lucrative slot on some of its shopping portals and help it achieve sales targets, the companies said.

That comes after he said last month around 100 Chinese apparel merchants had left its platform in the last quarter due to what he called "coercive" tactics by competing platforms.

"The strength of Vipshop's flash sale and apparel businesses, as well as its outstanding management team, create clear and strong synergies with us", says CEO Richard Liu.

"This partnership will further extend the strong inroads that we have made with female shoppers, and will expand the breadth and reach of our fashion business".

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