Tencent Eyes China’s Offline Retail Market Via JV With Supermarket Operators ParknShop, Yonghui

Chinese internet giant Tencent has joined hands with supermarket chain operators ParknShop and Yonghui Superstores to form a joint venture, a move to tap into the country’s vast and evolving offline retail market. 

The joint venture, namely ParknShop Yonghui, is valued at over RMB1.2 billion (US$170 million) with a 10% stake held by Tencent’s investment and music app-operating arm, Tencent Mobility. Tencent Mobility will invest RMB124 million (US$17.85 million) in cash, said Yonghui in a statement released by the Shanghai stock exchange on Wednesday.

Yonghui will make an equity contribution worth RMB622 million (US$89.57 million) for half of the joint venture. ParknShop (China) Investments Limited, a unit of one of the two largest supermarket chains in Hong Kong, will have a 40% stake with cash and equity contributions totaling RMB501 million (US$72.14 million), the statement added.

The kick-start of the joint venture marks Tencent’s growing ambition to take a chunk in China’s bricks-and-mortar shopping market, which accounted for more than 80% of China’s RMB36 trillion (US$5.18 trillion) retail market in 2017, as per statistics conducted by Goldman Sachs.

Targeting China’s giant offline shopping business, the internet giant has already acquired shares in offline retailers to help the market usher into a new retail era.

Tencent has spent RMB5.2 billion (US$748.98 million) for a 5% stake in Shanghai-listed Yonghui in December 2017. The company has also teamed up with Yonghui to sign a term sheet in late January to make a potential investment in French retailer Carrefour China.

The partnership should help Shanghai-listed Yonghui develop its business in the southern China’s Guangdong province and consolidate the two supermarket chain operators’ businesses in the area where Yonghui already has an edge, said the statement.

Founded in 1973, ParknShop is a subsidiary of one of the world’s largest health and beauty retail group the AS Watson Group. ParknShop is also a retail arm of Hong Kong conglomerate CK Hutchison, which was formerly chaired by tycoon Li Ka-shing.