Wanda eyeing 5b yuan for e-commerce

Source: iResearch Inc, Graphics: GT

Chairman says will invite large operators to invest in new business, but gives no specific details

China's leading real estate developer Dalian Wanda Group announced Thursday that it will seek 5 billion yuan ($800.5 million) for a new e-commerce business, a move that shows the developer's determination to promote online business but also raises queries about whether it could find a proper way to make money.

"We will invite the largest -Chinese e-commerce operators to invest in our e-commerce business… the initial investment will reach 5 billion yuan," Wang Jianlin, chairman of Dalian Wanda Group, said in a speech at a half-year working conference, which was posted on its official website.

Wang did not disclose the names of potential cooperation partners in his speech.

The public relations manager of Wanda Group Li Haifeng declined to comment about Wang's speeches or to disclose further information about the e-commerce business when reached by the Global Times Thursday.

Analysts said Wanda's move was "wise" as its department stores are facing challenges from the fast expansion of diversified retail formats, including shopping malls and e-commerce websites.

"Wanda urgently needs to transform its business model in the retail sector to survive," Zhang Ping, general manager of Corporate Research Center of INSITE Asset Management Group, a Beijing-based commercial real estate management company, told the Global Times Thursday.

Zhang believes Wanda will have some advantages in the e--commerce business, as it has a large amount of retailing resources.

Wanda Group's businesses include commercial properties, cinema lines, film production, KTVs, and department stores.

Despite the comprehensive business assets owned by Wanda, it seems that Wanda still has not figured out a definite business model to make money.

Wang said Wanda will spend three years to discover a business model that could make profit.

"Even if we cannot make profits [within three years], we must make it clear about how we could make money," Wang said in his speech.

The online to off-line (O2O) model, which used to be merely a theoretical concept for many Chinese consumers, will be what Wanda will use to develop its e-commerce business, Wang said in his speech, without explaining further about how it will be run.

Currently in China, O2O is widely applied by retailers from the service sector, such as catering operators. For example, O2O allows customers to get access to promotions and coupons via the Internet and then use them in physical stores.

Wanda already has an O2O website wanhui.cn, which it launched in December 2013, but it is still largely unknown after about seven months.

"I can't make out what Wanda plans to do," Zhang Yi, CEO and chairman of Shenzhen-based iiMedia Research Group, told the Global Times Thursday.

Zhang feels Wang will be confronted with more challenges than e-commerce operators such as Alibaba, partly because of conflicts between its retail department and its e-commerce department.

"How to balance the interests of its physical retail sector and e-commerce sector remains a serious issue," Zhang noted.

The CEO of Wanda's e-commerce unit Gong Yitao, a former senior technical director of Alibaba, resigned in March this year, according to media reports.

The leaders of Wanda's e--commerce department don't have the power to push forward resource integration among Wanda's different departments, news portal qq.com reported Thursday quoting unidentified insiders.

It seems that Wang may have also realized this issue as he addressed it in his speech, "The e-commerce department will be authorized more rights including independent fiscal rights."

Analysts suggested Wanda combine off-line and online resources together to survive serious competition from other e--commerce operators.

"It is wise for the physical retailer to explore an O2O strategy, which allow consumers to discover products online and then go to shopping centers to buy them," Steven McCord, head of Research for North China with US-based real estate adviser Jones Lang LaSalle, told the Global Times Thursday.

"Wanda needs to research a unique business model that is different from the department stores, shopping malls, and e-commerce websites, and combine its resources," Zhang said.