HONG KONG — Striking one of the world’s largest single strategic investments between Internet and brick-and-mortar commercial giants, late on Monday night China’s Tencent Holdings announced its lead investment to take a 14 percent share in one of the country’s largest mall developers, Dalian Wanda Commercial Properties.
The deal will see the WeChat owner, alongside prominent retailers Suning Holdings, JD.com, and the country’s fourth largest property developer Sunac China Holdings, invest approximately 34 billion renminbi, or $5.38 billion.
The new ownership structure is set to accelerate Dalian Wanda Commercial’s growth, the announcement said, helping the company to achieve its goal of 1,000 shopping malls in China “as early as possible,” up from the 235 Wanda Plazas it has now.
Also as part of this deal, Wanda Commercial will be renamed Wanda Commercial Management Group. Using an asset-light model, it stated it will “stop engaging in property development and will transform into a company solely focused on commercial management.” The agreement also promised, although with no set timeline, to take the company public.
The investment from Tencent, which owns a majority stake in JD.com, goes toe-to-toe yet again with Alibaba Group, which has also made a series of off-line investments including a $2.6 billion deal with department store chain, Intime Retail Group.
“It’s not surprising to see Tencent making this move, especially in light of Alibaba’s acquisition of China’s top retail and supermarket brand Darunfu back in November,” said RTG Consulting founder Angelito Tan. “Shortly after, in December, Tencent acquired the number-two retail and supermarket brand, Yonghui. Both Tencent and Alibaba are looking for ways to capture data from off-line traffic — whether that’s in one of Darunfu’s supermarkets or Wanda’s malls. They’d like to have ownership of the verticals that support mobile payments. The goal eventually is to use the behavioral analytics they gather to predict consumers’ future behaviors and plan their business strategies accordingly. These are smart moves for brands: Look at the behavioral analytics, develop algorithms, and enhance the shopping experience.”
While convergence between offline and online has sped up considerably, Michael McCool, managing director of AlixPartners, emphasized a strategic difference between “developing a capability instead of developing square footage.”
“These big tech companies rather than they themselves trying to dominate the physical retail world, they are using these connections with physical retail to refine digital services, which can then be swiftly implemented in any retailer in this space. By doing that, it will allow them to bring value to retailers, but to continue to grow in these very rapid ways that tech companies are almost required to grow by the market.”