Tencent and Yonghui to invest in Carrefour China

Tencent and Yonghui are to invest in Carrefour China in a move analysts tip will help revive the struggling French company’s mainland business.

The three companies plan to work together on data, smart retail, mobile payments and data analysis.

Jack Chuang, partner with OC&C Strategy Consultants, says the partnership will give Yonghui greater reach into the regions where Carrefour is strong – the north and northeast parts of the mainland.

“Yonghui’s fresh category strength and Carrefour’s import and packaged food offering also complements their respective business well,” said Chuang.

“Carrefour has been struggling in recent year to compete with strong players in the market and have been exploring options to improve its business.”

This is not the first time Carrefour has worked with strong local players to gain traction in markets – it partnered with Uni-President when they entered Taiwan in 1989 to leverage their local expertise and capabilities.

Tencent has already invested in Yonghui to build a more holistic online/offline operation to compete with the Alibaba-SunArt partnership and this deal will expand opportunities for the social media giant’s payment system. Tencent’s interest in both Yonghui and Carrefour will enable its offline reach to more than 800 stores: about 500 of Yonghui and 320 of Carrefour.

“Yonghui and Carrefour together will take it to second place behind SunArt group in terms of market share. Alibaba and Tencent have always been following in each other’s footsteps making sure not to be left behind, whether for actual strategic rationales or just in terms of perception.

So it isn’t too much of a surprise that they are doing this, but the partnership itself still feels relatively preliminary.

Tim Barrett, senior retailing analyst with Euromonitor International, said Tencent’s foray into physical retail is an attempt to further integrate themselves into their users’ lives, and increase the share of their wallet that they have influence over.

“Connecting online behaviour to in-store shopping behaviour by individual is the new holy grail, and Tencent seems to think they can do that do thanks to their strategic investments in retail and their massive dataset surrounding human behaviour from their social media apps.

It will be interesting to see if Tencent’s willingness to bring in big international retailers like Carrefour will help increase this understanding, or if the outside viewpoint will only be a distraction, as foreign retailers have a notoriously difficult time understanding the Chinese consumer.”

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