Tencent Restructures E-Commerce Business. Yixun Will Have to Go.

Employees of Tencent’s e-commerce business group were told this afternoon that there has been a restructure and some of them have been assigned to other business units.

Now it’s not a secret that Tencent is in talks with JD.com, one of the biggest online retailers in China that just filled for an IPO in the US, to buy a stake in the latter and possibly pay it with Tencent’s own online retail service Yixun and other resources.

Although it’s not confirmed, some Tencent employees learned that the online services of Yixun will be merged into JD.com and the new JD will replace Yixun to enjoy the access to WeChat users. Currently Yixun is selling selected items through Specials, the only official channel for m-retail on WeChat.

Tencent never figured out a way to make its e-commerce marketplaces or online retailing business as successful as other services like gaming or virtual item sales. Yixun’s market share was less then one fifth of JD’s in Q3 2013, according to a iResearch report. Compared to Tencent’s virtual item offerings or some other services, online retail is a cost-intensive and low margin business.

For JD.com, it will be a hugely positive factor for its IPO: 1) Yixun will add more market share into it, 2) WeChat, with a huge user base and convenient payment solution, is regarded as a huge opportunity for m-commerce, and 3) Tencent’s endorsement must encourage investors.