Three Heads Are Better Than One

By+Wang+Jun

If you see a girl in a beautiful dress， you may be seized by the desire to instantly know where to buy it. It will soon be possible to make this dream a reality in a Wanda plaza， simply by taking a photo of the dress and matching the image online. Chancing upon a movie being advertised， you may wish to know its playing times and ticket prices. In one fell swoop from your cellphone app， you can view the showtime at local Wanda movie theaters， select your seat and complete your payment. These are just some of the innovative services to be provided by the newly established Wanda E-Commerce Co.

On August 29， Dalian Wanda Group Co.， search engine Baidu Inc. and Internet service portal Tencent Holdings Ltd. announced at a signing ceremony in Shenzhen that they are to establish a joint venture， which will not deal in commodities， but sell services and create new online-to-offline （O2O） standards. The initial investment of the Hong Kong-registered Wanda E-Commerce Co. is 5 billion yuan （$815.66 million）， with Wanda Group holding 70 percent of the shares and Baidu and Tencent each owning a 15-percent stake respectively， according to a joint statement released by the three companies.

The area of O2O marketing involves the use of online promotion to encourage the consumption of goods and services in traditional physical retail environments. The business model is popular among foreign companies such as Groupon.

“O2O represents the biggest slice of the pie in the e-commerce market. There is still no O2O platform which integrates online and offline services. I think all the companies in this industry should have an equal opportunity to thrive. Given that no large unifying platform currently exists for this sector， we are willing to establish such a facility，” said Wang Jianlin， Chairman of Wanda Group.

Wang pointed out that while products such as books， skin care products and garments can easily be sold online， effectively selling services， such as catering， movies and other forms of entertainment， could potentially be an even bigger market.

Lasting partnership

“About half a year ago， Wang and I both recognized that such an opportunity would be quite good for us，” said Robin Li Yanhong， Chairman and CEO of Baidu at the signing ceremony. According to him， China now has more than 600 million netizens， which has greatly boosted development of the mobile Internet. Such a trend necessitates that Internet companies be closely connected with the real economy. “To Wanda， Tencent and Baidu， this represents both a challenge and an opportunity，” he said.

Pony Ma Huateng， Chairman and CEO of Tencent Holdings Ltd.， said that in the past two years， he， Li and Wang have met several times and he found their talks to be mutually enlightening. “In the entertainment sector， we are the best in both online and offline businesses， with an individual sales volume of billions of yuan respectively. At present， online and offline entertainment sectors stand completely apart from one another. I believe there are great opportunities in this field， but it would be practically impossible for the online and offline to be connected solely through computers or mobile phones， so offline facilities are indis-pensable，” Ma said.

At present， Wanda Group runs the countrys largest network of shopping malls， which incorporate entertainment facilities such as movie theaters. At a press release， Wanda said it expects to attract over 1.5 billion customers to its Wanda plazas， hotels and resorts in 2014， strengthening its position as Chinas largest offline commerce platform. Wanda estimates that its properties will draw in over 5 billion consumers each year by 2020， making it the worlds largest offline commerce platform.

“I estimate Wanda E-Commerce may be ready to do business as soon as next year， since our data center and payment system are already in development，” said Wang， adding that the total investment in Wanda E-Commerce will total 20 billion yuan （$3.26 billion） over the next five years， and new investors will also be introduced.

At the press release， Wanda stated the three companies will cooperate closely to develop payment and e-commerce financial products， build a universal customer loyalty program， integrate big data and products， etc.

Wanda E-Commerce aims to launch e-commerce services in all 107 Wanda plazas， including those yet to open this year， by the end of 2014. By the following year， all of Wandas plazas， hotels and resorts will be equipped with e-commerce services， said Dong Ce， CEO of Wanda E-Commerce， predicting that the Wanda e-commerce membership program will have more than 40 million members this year and is expected to increase to over 100 million next year.

Wanda E-Commerce will also seek to develop a series of innovative online financial products through direct collaboration with Wanda Groups financial arm， according to Dong.

Challenge for Alibaba？

Ma made clear his stance at the signing ceremony for the joint venture. “I guess the word‘e-commerce may mislead some industrial insiders， who may think this is an alliance of three magnates to launch a new round of attempts to dominate the e-commerce sector. This is wrong， as it fails to seize the essence of the trend，” he said.

However， this action is still regarded by some industrial insiders as a challenge to the dominance of Alibaba， Chinas biggest e-commerce operator.

Chen Xi， General Manager of the RET Rui Yide Chinese Commercial Real Estate Research Center， said the reason Wanda chose Tencent and Baidu rather than Alibaba is that both Alibaba and Wanda are experts at establishing platforms， so hypothetically， they would not be able to supplement each other in a joint venture. What Wanda sorely needs are users and greater capability in data processing.

According to Chen， Tencents social platforms have the largest number of users in China， while Baidu is at the cutting-edge in big data processing， therefore， their collective experience in searching， maps and group buying can offer a much-needed helping hand to Wanda.

Wang once said that Alibaba business-tocustomer platform Tmall is “Wanda online，” and that the target customers of the two platforms are the same. Therefore some analysts think Alibaba represents Wandas most potent rival for the O2O crown.

Wang Xiaoxing， an analyst with Analysts International， claimed Wanda E-Commerces O2O business model shows a lot of promise. He said that what Wanda intends to do is to build is an O2O model based on its commercial real estate， an approach different to the traditional e-commerce model. Thus， he maintained the business will exert limited influence on the conventional e-commerce market.

It will be unlikely that the O2O business of Wanda will be able to compete toe-to-toe with Alibabas B2C and customer-to-customer （C2C） platforms， and more competition will be seen in the supporting businesses.