Tencent Grabs Stake in China Mall Developer with Eye on O2O

Tencent, which produces the country’s wildly popular WeChat mobile app, is upping its stake in a shopping mall developer, as the Internet giant seeks to integrate its online payment system with offline retailers.

In a statement to the Hong Kong stock exchange yesterday, China South City, a developer of local outlet malls, announced that Shenzhen-based Tencent would raise its stake in the retail real estate company to 11.55 percent.

According to a report in the Wall Street Journal, the HK$822.6 million ($106.1 million) transaction would be handled through a private share offering. Tencent already owned 9.9 percent of China South City, and signed a strategic partnership agreement with the developer in June.

As part of the partnership between the two companies, China South City will integrate its ecommerce service into Tencent’s WeChat messaging app. The integration would allow customers to pay for purchases at the mall through WeChat’s online payment feature, and would also enable the application to push promotional messages at shoppers and track the movement of users through the mall.

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The agreement between Tencent and China South City comes less than one month after the Internet firm run by billionaire Pony Ma announced a similar alliance with developer Dalian Wanda, and online search firm Baidu.

Under the terms of the RMB 5 billion ($814 million) Wanda/Tencent/Baidu partnership, the three companies are said to be planning to work together to help consumers buy goods and services from Wanda’s 85 shopping malls nationwide through mobile apps.

In June this year, China Vanke, the country’s largest developer by sales, announced its own joint initiative with Baidu to use location-based services in creating a “consumer-business operator ecosystem” in more than 20 “smart malls” to be built Vanke.