September 22, 2011 12:43 pm

Tencent prepares combined ecommerce hub

Tencent, China’s largest internet company by revenues, plans to launch an ecommerce platform next month that will integrate its online shopping and social networking services on one website.

The group said it would invite other online retailers to establish flagship stores on the platform – called QQ Buy – and use Tencent’s various social networking and media tools for marketing.

The announcement of what Tencent calls a “super ecommerce platform” comes amid an increasingly fierce fight for market share in China’s ecommerce sector.

This week, Taobao Mall, China’s largest online shopping platform, signed up 38 other online retailers to open flagship stores on its website, in a move expected to help them lower costs but squeeze other rivals.

Analysts said Tencent’s new approach could give the group a chance to succeed in ecommerce where it has failed before.

Paipai, the company’s marketplace for trade between consumers, and QQ Mall, its business-to-consumer retail service, both lag far behind services run by Alibaba, China’s dominant ecommerce group.

“You can’t even speak of competition between the QQ platform and Taobao Mall because Taobao is so far ahead,” said Wang Tingting, an analyst at iResearch.

But experts believe the combination with the company’s huge social networking services could help the new business in the longer term.

Tencent operates QQ, the world’s largest instant messaging tool with more than 700m registered users.

The company makes money by selling an increasing range of virtual products and services, such as club memberships, virtual reality and games, to these users at low prices.

As China’s 10 largest ecommerce websites have a combined user number of just 30m, compared with a total number of 485m internet users in the country, analysts believe that this leaves more than enough room for Tencent.

QQ membership is concentrated among younger, less educated and less affluent Chinese outside the country’s largest cities, and QQ users are therefore more likely to be among the untapped potential for online shopping.

Tencent said the website would first go live in the southern Chinese province of Guangdong before expanding to the rest of the country, and gradually take on an increasing number of shops.

The new platform is one of the first tangible results of a strategic shift in which Tencent seeks to expand in ecommerce, social media, online search and online security to keep ahead of new rivals in these areas.

As part of that strategy, Tencent has bought stakes in eLong, an online travel agent, Kingsoft, an antivirus company, and Riot Games, a US online gaming company, this year alone.

The diversification is pushing down Tencent’s profit margins and analysts said QQ Buy is likely to contribute to that.

“In the beginning, Tencent will certainly greatly lower prices for online retailers to join the platform and invest big to get this going,” said Ms Wang. “The platform is therefore unlikely to be profitable anytime soon.”

Related Topics

Copyright The Financial Times Limited 2014. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE