Tencent to Transfer Its E-commerce Businesses to Chinese Online Retailer JD

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Chinese Internet giant Tencent announced today its e-commerce properties, including marketplaces Paipai (C2C) and QQ Wanggou (B2C), will be transferred to JD.com (or JD), the leading Chinese online retailer. Different from what we heard earlier, Tencent’s online retailer Yixun won’t be merged into JD right away. JD will hold a minor stake in Yixun after this deal and has the right to acquire the remaining stake in the future, according to the announcement.

Tencent will also buy 15% of JD outstanding ordinary shares for $214 million before JD IPO and 5% more on the post-IPO basis. JD has filed for IPO in the US to raise up to $1.5 billion.

Tencent promises to provide JD with the best resources on WeChat and Mobile QQ. The two companies will also cooperate on online payments. Martin Lau, president of Tencent, will join JD’s board of directors.

Tencent was ambitious to build a Taobao-like customer-to-customer e-commerce marketplace when launching Paipai in 2005. In March 2010 it opened Shop.qq.com (QQ Shangcheng), a platform providing Tencent’s QQ membership subscribers with deals and special offers from brands, to all users. In October 2011 another business-to-customer platform, Buy.qq.com (QQ Wanggou), was launched aiming to attract brands to set up online stores there. Shop.qq.com will be merged into QQ Wanggou in 2013 to compete with Alibaba’s Tmall.

Although Tencent had had almost all the Chinese netizens in its ecosystem, it failed in growing the online marketplaces. Chinese users now use “Taobao” to refer to online shopping.

Tencent gave e-commerce another try by acquiring 80% in online retailer Yixun in 2012. It hadn’t turned a profit as of the third quarter of 2013.

After getting rid of all e-commerce related properties, Tencent will be able to — although it’s unclear what a deal it has reached with JD — traffic or transaction-based commissions. The revenues may be not so big as those from gaming or other virtual sales but it won’t be losses.