Reports indicate that Tencent is set to a purchase a stake in Yonghui Superstores, a Chinese supermarket chain at a price of $638 million. An exchange filing by Yonghui revealed that the stake Tencent is acquiring is about 5%. With Tencent being the biggest internet corporation in China, the move is being seen as an attempt by the tech giant to promote the use of its virtual payments technology in stores.
“Investment in groceries, a high-frequency purchase category for consumers, will expand the reach of Tencent’s mobile payment system WeChat Pay, which has been gaining market share from Alibaba’s Alipay over the past few years,” wrote Vey-Sern Ling and Shen Li, analysts at Bloomberg Intelligence analysts, in a note.
In China Yonghui runs supermarket franchises and currently owns over 580 stores. Based on market share Yonghui is the fourth-largest operator of hypermarkets in China. The market leader is Sun Art while China Resources is second. Walmart Stores is in third position.
Tencent’s acquisition of an interest in a brick and mortar retailer comes in the wake of the largest online retailer in China, Alibaba, purchasing a stake worth $2.9 billion in Sun Art Retail Group Ltd. Currently Sun Art runs around 400 hypermarkets under various banners including RT-Mart and Auchan.
It is understood that Alibaba intends to use its technology in overhauling the physical retail sector in China that is estimated to be worth approximately $4 trillion with a view to driving growth. This was not the first acquisition by Alibaba as the online retail giant has already spent billions acquiring department stores, shopping malls and grocers.
So far Alibaba has deployed technology aimed at offering better management of customer data and inventory in order to increase market share and lure more rural customers. Walmart has partnered with JD.com in the hopes of reviving its sluggish Chinese operation. The American retail giant has also increased the network of its Sam’s Club stores as it targets consumers who have an eye on premium as well as imported goods.
In the recent past Tencent’s WeChat Pay service has been increasing its market share at the expense of Alipay, which is a service offered by Ant Financial, an affiliate of Alibaba. With e-payments both Alibaba and Tencent stand to obtain valuable data on shoppers and this will help them in targeting ads. In the third quarter, revenues for Tencent increased by 61%.