Tencent bets on online flea market with US$200M investment in Zhuan Zhuan

TechNode
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The competition between Tencent and Alibaba is now entering another field: second-hand goods trading market

The decades-long rivalry between Tencent and Alibaba spans almost every hot tech vertical in China. It’s no exaggeration to say that where there’s Tencent, there’s Alibaba, and vice versa. The competition between the two Chinese internet giants is now entering another field – second-hand goods trading market.

According to the official announcement, Tencent has injected a hefty US$200 million of funding for minority equity in Zhuan Zhuan, the used goods trading unit of China’s Craigslist, 58.com. The funding was raised at a reportedly US$1 billion valuation.

Under the agreement, 58.com will integrate the Zhuan Zhuan app and certain used goods related listing channels from the 58 and Ganji classified platforms into a separate group of entities, according to a company statement.

Launched in November 2015, Zhuan Zhuan is an online marketplace where users run their own stores to sell unwanted goods as well as make purchase from other sellers. More than 30 million users have posted a combined 100 million second-hand items on the platform with an average monthly trading volume of nearly RMB 2 billion (US$290 million).

“We are excited to welcome Tencent as both a partner and a direct investor in Zhuan Zhuan. This is a significant endorsement of a platform that was launched only a little over a year ago. Online transactions of used goods are very underdeveloped in China, but mobile technology and increasing user awareness are starting to create significant new opportunities. We are looking forward to accelerated growth in this market with more support from Tencent,” said Michael Jinbo Yao, Chairman and CEO of 58.com.

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The move marked Tencent’s entry into the online used good trading market, which puts the company in direct competition with its arch-foe Alibaba, whose digital flea market Xianyu (闲鱼 Idle Fish) is a top player. Alibaba injected last March a US$15 million capital support in Xianyu which reportedly had a market valuation of over US$3 billion in 2015.

The tie-up is not surprising given the history between the two companies. Tencent, which comes up short on e-commerce, holds a stake in both 58.com and JD as fortification against Alibaba’s e-commerce empire.

Like other Tencent-backed companies such as Mobike, Didi Chuxing, and JD, 58’s on-demand service Daojia has gained an entry point in WeChat. Given previous examples, it’s highly possible that Tencent would offer Zhuan Zhuan more support through integrating it into its social networking products such as WeChat and QQ.

China’s affluent population is now facing the new problem of how to deal with their barely used second-hand stuff, the result of over consumption. Selling it online seems a good option. Analysis agency CBNData predicted that the used-goods trade market could reach RMB400 billion (US$58 billion) in mainland China by 2016.

The trend has seen by the rise of a group of second-hand trading platforms such as Xianyu and Zhuan Zhuan. The boom even spread into several vertical markets, such as second-hand car trading, smartphones, closing and luxury products.

Public awareness for a more friendly lifestyle and the spread of the sharing economy also contributed greatly to the popularity of second-hand good trading services.

The article Tencent bets on online flea market with $200m investment in Zhuan Zhuan first appeared in TechNode.

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