A Trillion Dollar eCommerce Battle Rages in China

Two tech giants head-to-head. A trillion dollars’ worth of value between them. That’s the emerging situation in China, where Alibaba Group Holding, Ltd. and Tencent Holdings Ltd. are busy investing in both online and brick-and-mortar retail with such speed that many merchants are being forced to pick sides. Since the beginning of last year, both companies together have invested over $10 billion in retail.

Alibaba, China’s top eCommerce company, has invested in such companies as Suning.com (one of the largest non-government retailers in China), Intime Retail, Sanjiang Shopping Club (a supermarket company), Lianhua Supermarket, Wanda Film, and Easyhome (a home improvement store similar to IKEA). This month, Alibaba, which is already invested in its payment affiliate Ant Financial, increased its investment stake to 33 percent. Ant runs Alipay, China’s top mobile payment platform.

Tencent, which has primarily focused on social media, digital payments such as the very popular Weixin chat app, and gaming, has a major stake in eCommerce company JD.com (also known as Jingdong, and formerly known as 360buy), the world’s second largest online retailer. Walmart also has a stake in JD.com, and Walmart and Tencent are potential investors in French grocer Carrefour. Tencent has also invested Yonghui Superstores Co Ltd. (a supermarket company), Vipshop Holdings Ltd. and Heilan Home (apparel retailers), Wanda Commercial (a mall operator), and Bubugao (a grocer).

All of these brick-and-mortar investments are important because 85% of Chinese shoppers are still stopping at concrete locations. However, though people love to go out shopping, they still want all the convenience of online payments. The combination of investments in mobile payment platforms and physical shopping will provide both companies with many future opportunities. Further, the physical stores will also benefit from the payment platforms, improved logistics, and a variety of other services.

Shopping is changing across the globe, and eCommerce companies, retailers, and online payment platforms are both at the forefront of this change and have to change along with it. While many brick-and-mortar retailers are going out of businesses, many others are taking a mixed online-physical approach with varying levels of success, and still others keep their focus online. However, even places like Amazon are looking to brick-and-mortar expansions. The future of retail is going to be much more complex than most imagined even a few years ago, and places like Tencent and Alibaba are making the big investments needed to make the future.