Tencent and JD.com Investing $863 Million in Vipshop

Tencent Holdings Ltd. the internet giant based in China announced Monday it was leading an investment of $863 million in Vipshop Holdings, an online apparel platform upping the rivalry it has across retail with the Alibaba Group.

Tencent is investing $604 million for a stake of 7% in Vipshop, while JD.com, the e-commerce company will make an investment of $259 million for a stake of 5.5%, said the two companies in a prepared statement.

The two companies did not say why the stock Tencent purchased cost more than that of JD.com.

This deal extends the recent push Tencent is making into retail, which is the backbone of rival Alibaba. Tencent hopes it can leverage WeChat its messaging service and its payment systems online to drive demand for shopping.

Martin Lau, the President of Tencent, said the investment would bring Tencent’s audiences, payment support and marketing solutions to Vipshop to help tap the rising middle class in China. WeChat has close to one billion users.

The looming battle in retail reflects a broader and long running standoff involving Tencent and Alibaba that has seen the two make competing investments in industries from food delivery to gaming and bike sharing.

One Hong Kong based analyst said the market in China has two powers in Internet, and investments either fall into Tencent or Alibaba.

However, he added that deals of this nature were difficult to convert to successful ventures, and it is unknown how they will integrate successfully and if they will turn out to be effective investments.

Alibaba has looked to reshape the online as well as offline battle lines in China. Its Taobao and Tmall platforms are dominant online and it’s invested more than $10 billion to make a push into traditional brick and mortar retail stores.

Tencent is the most valuable company in Asia with a $473 billion market value. It is planning to invest over 4.2 billion yuan or $636 million for a stake of 5% in Yonghui Superstores an operator of supermarkets.

It already holds a major stake in JD.com.

This latest deal, which is a premium of 55% to the closing share price of Vipshop as of last Friday, should help Tencent tap the young female shoppers of the company and give access to large sums of transaction and consumer data to help compete with Alipay from Alibaba.

CEO of JD.com Richard Liu expressed that the move would aid in expanding the reach and breadth of its fashion business.

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