China’s Online Giants Barrel Into Offline Retail

China’s largest e-commerce companies signed a slew of retail deals last week amid a battle to claim offline influence.

Tencent Holdings Ltd. unit Shenzhen Tencent Puhe Ltd. Partnership agreed to buy a 5.31% stake in clothing retailer Heilan Home Co. Ltd. for 2.5 billion yuan ($397 million), Shanghai-listed Heilan Home announced late Friday.

Once the equity transfer between Heilan Home controlling shareholder Rongji International (Hong Kong) Co. and Tencent is complete, Tencent investment unit Linzhi Tencent Technology Co. and Heilan Home will set up a fund of 10 billion yuan fund that will focus on investing in the fashion industry supply chain.

Rongji International will continue to hold the majority of shares in Heilan Home after the deal, which is Tencent’s first investment in the clothing chain. Heilan Home has over 56,000 outlets across China, and owns both menswear and womenswear brands. In the first three quarter of 2017, Heilan Home brought in 12.07 billion yuan in revenue, making a profit of 2.41 billion yuan.

Also on Friday, supermarket operator Better Life Group announced it had signed an agreement with Tencent in which they agreed to cooperate on applying Tencent’s cloud-computing and artificial intelligence capabilities, as well as its social media platforms, to Better Life’s supply chain and customer services.

The cooperation agreement with Better Life is Tencent’s third recent foray into the supermarket sector. The internet company purchased a 5% stake in China’s leading supermarket chain, Yonghui Superstores, in December, and signed a cooperation agreement with French operator Carrefour in January.

Better Life has 304 stores in China, primarily in the provinces of Hunan, Jiangxi, and Sichuan, and the Guangxi autonomous region.

Major online shopping platform JD.com also said on Friday that it has entered a strategic partnership with Hong Kong-based Fung Retailing, which runs thousands of stores globally, including the Asia outlets of toy chain Toys R Us. As part of the partnership, JD.com and Fung Retailing will work on building an artificial-intelligence-based retail system.

Alibaba Group Holding Ltd., China’s largest e-commerce company, has also been extending its reach into traditional retail lately. Hypermarket operator Sun Art Retail Group Ltd. announced Tuesday that two Alibaba executives will now sit on Sun Art’s board of directors, two months after the internet giant purchased more than a third of Sun Art for HK$22.4 billion ($2.87 billion).

Contact reporter Teng Jing Xuan (jingxuanteng@caixin.com)