Xbox One Pre-Orders in China

 In China, Microsoft, News

Weixin XBX1-SJULY 29, 2014 • JD.com Inc., the second largest e-commerce player in China after Alibaba Group Holding Ltd., is taking 500 yuan ($81) Xbox One pre-orders between July 28 and July 30. In a nod to the popularity of online chat services in the country the pre-orders are being taken via Tencent Holdings Ltd.’s Mobile QQ and WeChat (Weixin in China) apps. Last March Tencent took a 17.6 % stake in JD.com. In May, JD.com was listed on the NASDAQ exchange, raising $1.78 billion with the IPO. The Microsoft Corp. console is expected to make its debut in China on September 23 via a partnership with Shanghai-based BesTV New Media Co Ltd. The Xbox One will retail for 3,699 yuan ($600).

Impact: DFC Intelligence recently released forecasts for the Xbox One in China. Suffice to say these forecasts are very preliminary as much is still unknown as the Chinese government has recently threatened to use anti-monopoly regulations to crack down on Western technology companies in their domestic market. That said, this Xbox One news is much more than a simple pre-order story. What we are seeing is a major manifestation of a Chinese market power play by Tencent and JD.com (also known as jingdong.com and 360buy.com) against Alibaba. As part of Tencent’s investment, JD.com acquired direct access to the leading chat networks in China, and took over control of Tencent’s QQ Wanggou and Paipai online stores including logistics and personnel. As a result, JD.com now permanently resides on the WeChat landing page as the main online store.

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Alibaba is a huge operation that transacts around half of all online sales in China. The company also controls 80% of consumer-to-consumer online sales through its Taobao service. Fearing the growth of Tencent’s chat platforms, and the growth of online transactions flowing through them, Alibaba has made a strategic move to compete directly with Tencent using mobile games to draw in consumers. During the last year Tencent has actively gone out to pre-empt Alibaba. The same month as the JD.com investment Tencent took a $500 million stake in South Korea’s CJ Games Corp. to keep the mobile game publisher out of Alibaba’s hands. By making JD.com its e-commerce partner, and giving the online retailer full access to its chat platforms, Tencent is maneuvering to take market share away from Alibaba prior to the latter’s U.S. IPO. Alibaba was expected to issue its stock offering in August, but last week announced that the IPO would be postponed to after Labor Day. Estimates are Alibaba could raise between $15 billion and $20 billion. JD.com’s partnership with Tencent is pure gold – providing the tools for the online retailer to ramp up the kind of scale required to compete effectively with Alibaba that were lacking before. JD.com’s two-day Xbox One pre-order program gives us a window on the colossal turf war going on between Tencent and Alibaba.

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