Baidu and Tencent are teaming up with a Chinese shopping mall operator in a joint venture that could steal business away from local e-commerce giant Alibaba Group.
The two Internet companies are partnering with Dalian Wanda Group, a Chinese conglomerate, to spend 5 billion yuan (US$811 million) on a new e-commerce company, they announced on Friday.
Wanda will control a 70 percent stake in the joint venture, while Baidu and Tencent will each hold a 15 percent stake.
Baidu, China's largest search engine, and Tencent, a social networking and gaming company, have both made forays into China's online retail space in the past. But neither have managed to crack Alibaba's hold over the country's growing e-commerce market.
Friday's announcement, however, means the two companies will tap Wanda's resources to flesh out a new e-commerce platform that could challenge Alibaba. Wanda, operates dozens of department stores, movie theaters and hotels, but wants to bring more Chinese customers to its shops through online channels.
For consumers, the partnerships could lead to easier ways to shop from Wanda properties. In the future, customers can snap a photo of a dress or a movie poster with their smartphone to find out where to buy the product, or what time the film will show, said Baidu's CEO Robin Li during Friday's announcement.
"If you have a demand, we can not only tell you where you can satisfy your need, but we can do it immediately," Li said.
Tencent's CEO Ma Huateng said people shouldn't confuse the joint venture as another attempt to break into China's online retail sector. "This is more about how do you use the Internet to make an already established economic entity smarter," he said, while speaking at the event.
Friday's announcement comes as both Wanda and Alibaba have been competing in China's retail sector. Alibaba, which operates e-commerce sites Taobao and Tmall, has taken sales away from many large brick-and-mortar stores in China, said Mark Natkin, managing director of Beijing-based Marbridge Consulting.
In response, Chinese retailers are expanding with their own e-commerce sites, but still wanting customers to shop at their physical stores, he added.
"Somebody asked me, 'Who actually goes to these stores anymore?'" Natkin said. "To some degree, the success of these businesses hinges on their ability to incentivize customers to come in."
Both Baidu and Tencent have plenty of online products to help users connect with Wanda's stores. In Baidu's case, the company has its search engine, a major online mapping service, and a popular app downloading platform. Tencent, on the other hand, has its messaging services, including WeChat, a mobile app that has over 438 million monthly active users.
In an email, Tencent said the joint venture will help popularize its online payment services on WeChat, making it a destination to complete purchases from Wanda stores.
"Tencent is behind in the mobile payment space," Natkin said. "They are looking at anything they can do to wrest away market share from Alipay (Alibaba's own payment service)."
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.