Chinese Internet giant Tencent is making a second attempt to help Dalian Wanda Group take its shopping mall empire online, as the maker of China’s ubiquitous WeChat app renews a once-failed partnership with the commercial developer.
Under the terms of an agreement announced last week, the two mainland heavyweights are forming a new joint venture, together with Tencent’s group buying affiliate Gaopeng, to merge e-commerce technologies with Wanda’s fleet of more than 235 Wanda Plaza shopping centres in the hopes of creating a network of smart malls.
Wanda to Lead New Shopping Centre Effort
In a statement, Wanda said that its chairman, Wang Jianlin, “is determined to integrate Wanda’s brick-and-mortar retail business with online resources from its new partners, transforming the offline environment into “smart shopping malls.”
Wanda Group’s Wanda Commercial Management Group, which succeeded the former Dalian Wanda Commercial Properties earlier this year, is taking a 51 percent stake in the joint venture, while Tencent Holdings Ltd will hold 42.5 percent, and Gaopeng, the former Chinese subsidiary of Groupon, will take the remaining 6.5 percent. Financial details of the transaction were not disclosed.
The joint venture allows Wanda to once again repackage some of its online subsidiaries, and marks the second time that the commercial developer has turned to Tencent in an effort to smarten up its bricks-and-mortar retail assets. However, analysts are already raising doubts regarding the potential results of this rebooted retail romance.
Reviving a Faded Retail Romance
The new initiative will include Wanda’s ffan.com online-to-offline (O2O) shopping platform and also incorporate Wanda’s Internet Technology unit, after the group was reported earlier this year to be laying off some 95 percent of its 6,000 staff. Tencent is said to be contributing access to its online traffic, among other resources, and Gaopeng would add the use of its electronic invoicing expertise.
This latest deal comes after Wanda, Tencent and search engine provider Baidu teamed up in 2014 for the development of ffan, only to have the two Internet firms quietly exit the deal among local media reports that the online giants had failed to provide the agreed funds.
Some experts have put the blame for the collapse of the earlier deal on Wanda and are skeptical about the renewed tie-up. “Whether the plan can be followed through depends largely on Wanda’s determination for such a big change. It’s not easy for a traditional retail business,” Nomura Securities analyst Shi Jialong was cited as saying in an account in China’s 21st Century Business Herald.
To avoid repeating the same mistakes in the previous deal, “online and offline resources must work together,” Shi added.
Tencent Could Play Bigger Role in Revived JV
While the elements of this latest joint venture are similar to the earlier effort, Tencent may have a bigger voice under the new arrangement. Apart from its 42.48 percent stake in the new company, the company helmed by tech mogul Pony Ma in January bought a 2.06 percent stake in Wanda Commercial and owns a 21.07 percent stake in Gaopeng.
In the 2014 agreement, Wanda controlled 70 percent of the joint venture, while Tencent and Baidu had 15 percent each.