Tencent Ecomm: Fragmentation After A Whole Year’s Consolidation

In response to a local report exposing the company’s messy ecommerce business, Tencent last week confirmed the long-rumored merger of 51buy.com and buy.qq.com, saying the two efforts would be merged at an appropriate time. It didn’t explicitly say when though.

Tencent finally get started streamlining its confusing and complicated ecommerce business lines, better sooner before it’s too late.

Pony Ma recently admitted that the company’s e-commerce arm was in trouble. Buy.qq.com as Tencent’s own-child saw no uptick trend since its inception while the adopted 51buy’s performance was relatively much more cheering. The integration might be a solution to its fragmented e-commerce business since both are B2C services.

According to iResearch, in Q2 2012, Tmall and 360buy took the top 1 and top 2 slots, with 57.1% and 20.1% of the B2C market share respectively. As for Tencent, 4%, the first time it surpassed Amazon China (which speaks to how terrible Amazon is in China).

Tencent has its own advantages in the market though. Firstly, it takes a lead in terms of user base. QQ client and Tencent Weibo enjoy active user base of 784million and 425million respectively. Secondly, Tencent never lacks money. An internal staff told local media that, Tencent e-commerce group signed up a RMB 10 million worth framework agreement with Baidu to market 51buy.com on the search engine. However, last they check only several millions were put into real use. And 51buy.com knew nothing about the marketing deal.

With trillions users and big money, why Tencent ecommerce biz isn’t faring well?

It seems that the management teams integration didn’t pan out well after the 51buy acquisition. Different teams focused only on their own business without enough communication and cooperation.

Pony Ma also confessed lately that corporate culture dilution, management friction, resource allocating, coordination among different divisions as well as control of new products were really big troubles now as the firm bought in a bevy of ecommerce startups.

As Tencent’s SVP Wu Xiaoguang put it, the keyword for Tencent ecomm group in 2012 is consolidation. But it doesn’t seem to work well. And there isn’t much time left as Taobao/TMall are striding fast and360buy and Suning are catching up quickly.

screenshot of buy.qq.com homepage