Tencent to challenge Alibaba’s new retail with new investment in Yonghui’s Super Species

The land grab between Tencent and Alibaba has recently extended to the retail space. On December 8, Chinese media Caijing Magazine reported that Tencent had purchased a stake in Super Species, the new retail unit of one of China’s largest supermarket chain operators Yonghui Superstores.

Following the report, Yonghui shares jumped to its daily limit in Shanghai on December 8. Yonghui and Tencent have not officially commented on the validity of the rumor.

China’s tech behemoths Tencent and Alibaba have been fighting across a number of lucrative industries such as music, video streaming, and the fast expanding mobile payment market. E-commerce, in which Alibaba holds an unshakeable position, is a weaker spot for Tencent but a 21.25% stake in JD.com has given the social media and gaming giant buffer against Alibaba.

Over the past year, China’s e-commerce players increasingly have their sights set on the offline space, betting on a future of “new retail”, a term coined by Alibaba’s Jack Ma to describe the fuller integration of online and offline shopping experience. Super Species is one manifestation of the new retail concept and JD.com—Tencent’s ally—already holds 10% of the new retailer’s parent company. Alibaba is charging into the space with its own brick-and-mortar Hema Supermarket.

“Tencent taking a stake in Super Species will definitely become a threat to Hema,” Kai Ge, a freelance writer on China’s e-commerce industry, told TechNode.

As of July, Yonghui operates nearly 500 traditional supermarkets across China and 17 Super Species stores in counting. Hema Supermarket has 20 locations nationwide. In November, Alibaba became the second largest shareholder of China’s top grocer Sun Art Retail Group which runs about 450 hypermarkets. These physical stores can potentially be a testing ground for Alibaba’s Hema model.