New Threat Spurs E-Commerce Giant into Action: Tencent wants its WeChat app to dominate mobile shopping, but Alibaba has countered with a flurry of moves to get back in the game

11.22.2013 15:45

New Threat Spurs E-Commerce Giant into Action

Tencent wants its WeChat app to dominate mobile shopping, but Alibaba has countered with a flurry of moves to get back in the game

By staff reporter Zhu Yishi

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On November 11, which has become known as a major sales day for China’s e-commerce companies every year, Alibaba Group saw Taobao.com and Tmall.com combine for sales of 35 billion yuan. But the big day has Alibaba feeling anything but festive. The reason for this is that the company’s chairman, Jack Ma, expects competition to get fiercer as mobile Internet become more popular.And a major potential rival for Alibaba in this new frontier is Tencent Holdings, operator of the popular instant messaging application WeChat. In an email to employees in late October, Ma called on the company to unify its efforts to fend off Tencent and WeChat.

Indeed, amid the growing popularity of mobile Internet, WeChat’s dominance is posing a big challenge to Alibaba, prompting it to switch its focus from standard computers to mobile devices.

An Alibaba source said that the company believes that while the war for standard e-commerce services is winding down, the one over mobile Internet is just starting.

Since the beginning of this year, Alibaba made several investments intended to pave its way into the new frontier. It bought stakes in Sina Corp.’s microblogging service, the online map provider AutoNavi Holdings and mobile browser UCWeb.

Meanwhile, WeChat, which had a user base of more than 400 million people by July 25, has been exploring a range of offerings in e-commerce and even online finance.

A Clarion Call

To counter WeChat, Alibaba recently launched its own mobile messaging apps. Tencent’s ambition to jump into e-commerce on mobile Internet woke Alibaba up, said Peng Lei, CEO of Alibaba’s financial service division.

Tencent’s chairman, Ma Huateng, and president, Liu Zhiping, have signaled their ambitions in mobile e-commerce in recent company speeches. In one speech, Ma called on Tencent employees to revolutionize mobile Internet.

And Liu pointed the way, saying that as the profit models for mobile Internet services such as games, e-commerce and ads became clearer, profitability was growing. Meanwhile, while messaging and media services on standard computers decline, their development on mobile devices had been rapid, he said.

In short, he seemed to be saying that the door to opportunity was wide open to Tencent.

Tencent won a foothold in the first wave of Net development with its media and entertainment services, Liu said. With the rise of mobile Internet, it now needed to seek new opportunities in online finance and retail.

The lynchpin of Tencent’s e-commerce aspirations is the payment service it embedded in WeChat. The service was launched on August 5 in an update of the app.

Zhang Ying, deputy general manager of WeChat’s product department, said on November 18 at a conference in the southern city of Guangzhou that the launch of the payment service helped the app become a complete online shopping chain for its users. With bank cards linked to their apps, WeChat users can make quick online purchases by scanning quick response (QR) codes. They can also track deliveries and review products.

On the November 11 sales extravaganza, WeChat users completed 80,000 purchases on the app. That may seem paltry compared to the 160 million orders placed on Taobao and Tmall, but WeChat’s e-commerce ambitions have gotten Alibaba’s attention.

Or, as Alibaba’s Peng said: “The horn has been sounded.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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