A suddenly intensifying rivalry between Internet giants Alibaba and Tencent (HKEx: 700) is building steam, as the pair jockey for position in the fast-growing space for electronic payments and other financial services. It does seem appropriate that these 2 companies are setting the national tone in this race, as they are China’s 2 biggest Internet firms and have risen rapidly on the strength of their ability to innovate. I slightly favor Tencent in this new race due to its ability to roll out new services that complement its existing products at a relatively gradual pace. That contrasts with Alibaba’s most recent approach of launching a much wider range of services at a quicker pace, which runs the risk of overwhelming and confusing consumers.
The pair of companies were in the headlines last week afterAlibaba blocked merchants on its popular e-commerce platforms from opening accounts on Tencent’s equally popular WeChat mobile instant messaging platform. (previous post) Alibaba said it took the action to protect its merchants, even though many believe the move was designed to steer those merchants away from a rival platform.
Now the latest reports are saying that Tencent is boosting its 51Buy e-commerce platform with a new package-tracking feature, in what looks like a major challenge to Alibaba’s more established e-commerce service. (English article) At the same time, other reports say Alibaba’s Alipay e-payments unit is preparing to roll out a new credit card service, as it seeks to stay a step ahead of Tencent’s own Tenpay e-payments service. (Chinese article)
Let’s start with a closer look at the news on Tencent, whose new service will allow users of its 51Buy e-commerce service to track their packages throughout the delivery process. The feature, which uses GPS technology, will also notify users when a package is within 1.5 kilometers of their home, and allow them to contact deliverymen directly. Introduction of the service follows Tencent’s trialing of another service that will allow some customers to get their products in as little as 2 hours after placing an order. (previous post)
Tencent knows that these fast delivery and packaging-tracking services are one area where it can enjoy an advantage over Alibaba, which would have a more difficult time offering such services due to its different business model. Tencent can offer these services because it sells directly to consumers and thus has direct control over its merchandise and shipments. That contrasts with Alibaba, which operates popular e-commerce platforms populated by third-party merchants that rent spaces and are responsible for stocking and delivering their own products.
From Tencent’s newest initiative let’s look quickly at Alibaba, whose new Alipay credit cards will reportedly hit the market next week and offer credit limits of up to 5,000 yuan ($800). Credit for the new cards will be provided by partner banks, allowing online shoppers to make their purchases without having to first put cash in their Alipay or other online accounts, according to the reports.
This product does indeed like it should get a strong reception, since Alipay users will be able to make their purchases on credit instead of having to always maintain sufficient cash in their accounts. The roll-out of this latest product follows Alibaba’s introduction in June of E Yu Bao, another product designed to let users invest excess funds in their Alipay accounts into financial markets rather than leaving them idle. (previous post)
Word of Alibaba’s latest financial product comes the same week that Tencent launched the newest version of WeChat 5.0, which also includes a new integrated e-payments element that makes it easier to make online purchases through the service. Look for a lot more of these kinds of moves in the months ahead, as these 2 Internet giants vie for supremacy in the emerging field of electronic financial services and in broader e-commerce.
Bottom line: A building rivalry between Tencent and Alibaba in electronic financial services and e-commerce looks will intensify in the months ahead.
This article was first published in the online edition of the South China Morning Post at www.scmp.com.