The Chinese ecommerce market continues to be a whirlwind of activity. The latest appears to come from Internet company, Tencent, creator of WeChat and QQ messaging services, which announced a USD $195m investment in China South City, a 9.9% stake with an option to raise its stake to 13% over the next two years.
According to its website, China South City “is one of the leading developers and operators of large-scale integrated logistics and trade centers in China”. The company is an interesting one and could help Tencent improve its position against its major competitor, Alibaba. Among its services is e-commerce which, according to the company website, is to “provide trade center shops the advantages of physical stores and virtual shops for both B2B and B2C trading”. An e-commerce park with a total space of almost 2m sq. m has been established in Shenzhen to support this service as well as one in Nanchang that has over 1m sq. m. of space. Five more such parks are planned in Nanning, Xian, Harbin, Zhengzhou and Hefei. These parks include such amenities as office space, warehousing and logistics and business support facilities such as banking, exhibition and conference space and more.
China South City also has a logistics services subsidiary with such services as warehousing and freight forwarding. It also provides a warehousing management service and arranges on-site third party delivery and distribution services.
According to the press release, the two companies will collaborate on:
- E-commerce: China South City will utilize Tencent’s Internet technology in its construction of the China South City e-commerce platform to serve small and medium enterprises and to help enterprises develop their own online transaction businesses.
- Outlet Services: Explore opportunities for co-operation with respect to online outlet services for branded goods by leveraging China South City’s resources with respect to physical outlet services for branded goods and Tencent’s e-commerce platform.
- Online and Offline Integration: Collaborate to develop China South City’s retail business to provide an integrated online and offline retail service experience through Tencent’s platform.
- Online Payment: Collaborate to provide Tencent’s online payment services to China South City’s tenants and customers.
- Warehousing and Logistics: Collaborate in the planning of joint warehousing facilities and logistics arrangements for e-commerce businesses
Martin Lau Chi Ping President of Tencent said “China South City is implementing a differentiated strategy of transforming existing local wholesale markets into modern large scale trade and logistics centers. We recognize its unique business model and the results it has achieved. Chinese small-to- medium sized enterprises have huge demand to expand their businesses online. Cooperation with China South City enables us to jointly facilitate such enterprises migrating online, utilizing China South City’s physical locations and logistics capabilities, together with Tencent’s Internet user platforms and technology capabilities."
Indeed, with this investment Tencent has moved fully into ecommerce logistics. As it integrates its technology solutions into China South City’s platforms, the possibility of it dabbling in additional logistics technology solutions and linking these to its online payment system makes for an interesting scenario in China’s ecommerce logistics market.