RETAIL: Wanda E-Commerce Raises Funds, Adds TCL
Bottom line: Wanda’s new e-commerce initiative looks overvalued following a recent investment, but could have the resources and expertise it needs to pose a serious challenge to Alibaba and JD.com.
Fresh from the successful listing of its core real estate arm, Wanda Group is pushing full-steam ahead into another major new initiative in e-commerce, aiming to challenge industry leaders Alibaba (NYSE: BABA) and JD.com (Nasdaq: JD). Wanda’s colorful and very wealthy founder Wang Jianlin was busy talking up his e-commerce initiative this week, announcing a major new funding and important new partner for the project. Wang has forged ahead in several new areas over the past year, including hotels, theme parks and movie theaters, as he attempts to build up an entertainment empire to rival global names like Disney (NYSE: DIS).
Among the many new initiatives, this e-commerce one looks like one of the most difficult because it’s in the new media area that will take Wang far from his background in more traditional industries like real estate. But that said, Wang has certainly chosen some potent partners for his e-commerce initiative, including Tencent (HKEx: 700) and Baidu (Nasdaq: BIDU), 2 of China’s top 3 Internet companies.
He also brings a potent offline shopping element to the venture with his national empire of shopping malls. That could give him an edge over traditional e-commerce companies like Alibaba as he delves into the online-to-offline (O2O) experience, which combines traditional and online shopping for consumers who may, for example, want to try using a gadget before actually buying it online.
Word of this e-commerce drive first emerged over the summer, and now Wang has jumped back into the headlines with announcement of his new fund-raising for the project. At the same time, separate reports say the project is being joined by TV and cellphone stalwart TCL (Shenzhen: 000100).
Let’s start with the fund raising, which comes in reports that say the venture has just raised 1 billion yuan from a couple of investment funds. That deal that now values the company at 20 billion yuan, or about $3.2 billion. (English article; Chinese article) The reports add the venture will formally launch sometime in the fourth quarter.
The other separate reports say that TCL has joined the venture with its own $100 million investment. (English article; Chinese article) The TCL news comes from its own announcement to the Shenzhen stock exchange, and it’s unclear whether this investment is part of the larger 1 billion yuan funding round announced by Wanda itself. I suspect the 2 are related, and TCL is probably one of the 2 new partners in the venture.
Under the new tie-up, TCL will become a leading supplier to Wanda shopping malls for its trademark TVs, and also some of its other appliances like air conditioners, and smart appliances. I expect TCL will also make its extensive national distribution network available to the Wanda venture for more efficient product delivery, similar to another logistics-related tie-up between Alibaba team and appliance giant Haier (HKEx: 1169) announced about a year ago.
All these details show that Wang is taking this new e-commerce initiative quite seriously, as he realizes an online element may be a crucial to Wanda’s future success and even survival. Wang and TCL’s Chairman Li Dongsheng both come from China’s earliest group of entrepreneurs, and aren’t particularly tech-savvy. But each clearly realizes the importance of online business and is trying to find a way into the space.
I personally find the $3.2 billion valuation for Wanda’s new e-commerce initiative a bit high, since the company currently doesn’t have any revenue and won’t even launch a business until the end of this year. But that said, I do have a lot of respect for all of the business leaders involved in this initiative, who are some of China’s biggest names in their spaces. Accordingly, I would give Wanda’s e-commerce initiative a 50-50 chance of posing a series challenge to Alibaba.
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