Tencent invests in e-commerce platform Youzan to boost enterprise business

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(Image credit: Youzan)

Chinese e-commerce service provider Youzan announced on Tuesday it has completed an HKD 1 billion (around $130 million) round of funding led by Tencent, as the gaming giant pushes forward on growing its enterprise-facing businesses.

According to an announcement released Tuesday after trading hours, Hong Kong-listed Youzan has agreed to issue around 1.72 billion new shares at HKD 0.53 per share to five parties. Poyang Lake Investment, a fully owned subsidiary of Tencent, is purchasing the largest portion of more than 1 billion shares totaling around HKD 550 million. Tencent will account for approximately 6.5% of the total number of shares after the deal is completed.

The company’s share price surged by more than 12.5% on Wednesday by the end of morning trading.

A company spokesman told TechNode on Wednesday that the funds will be used to promote the deployment of its new retail business solutions for offline businesses, including shopping malls, hypermarkets, and hair salons. Tencent declined to comment when contacted by TechNode.

Founded by Zhu Ning, formerly Alipay’s chief product designer who is widely known as Bai Ya, Hangzhou-based Youzan develops SaaS (Software as a Service) products for online and offline retailers. Merchants use the software to manage their online stores, and its platform is highly customizable. The company began developing store management solutions in 2017.

Following its IPO a year ago, the company reported in March sales revenue of HKD 685 million in 2018, more than doubling revenue from a year earlier. It has 4.42 million clients, including China’s largest retailer Wangfujing Group, Asian-based department store operator Parkson, as well as Hong Kong-listed snack purveyor Zhou Heiya.

The investment follows a round of top-down restructuring Tencent announced in September with the aim to shift its focus from consumers to business clients. The social and gaming giant is looking to embrace the so-called “industrial internet,” and strives to be “an assistant” for the integration of the internet with retail, medical, and education sectors, a Tencent executive said publicly in September.