MEILISHUO.COM, a fashion retailer backed by Tencent Holdings Ltd., is merging with rival Mogujie.com to form a company with US$3 billion in sales, marking the latest alliance in the country’s e-commerce industry.

    Mogujie founder Chen Qi will become the chief executive officer of the merged entity, and Tencent will increase its investment, according to a statement by the new company. The combined company, with sales of 20 billion yuan last year, also is valued at US$3 billion, according to an email sent to employees yesterday by Chen.

    The deal will help the companies compete with Alibaba Group Holding Ltd. and JD.com Inc., which dominate a Chinese e-commerce industry projected to expand to 3.6 trillion yuan (US$547 billion) this year. Smaller operators are combining to gain scale and end costly battles for market share.

    The combination of the fashion sites, both backed by Hillhouse Capital Management, follows the mergers of travel sites Ctrip.com International Ltd. and Qunar Cayman Islands Ltd. and group-buying startups Meituan.com and Dianping.com.

    Meilishuo had sought to raise about US$300 million since April, people familiar with the matter have said. The company, whose name means “Beauty Talk,” was considering a U.S. initial public offering at a US$2.5 billion valuation, people familiar with the matter said last year.

    Mogujie, founded in 2011 and backed also by IDG and Qiming Venture Partners, has 130 million registered users and raised a D round of more than US$200 million in November, according to statements from the company in December.

    Meilishuo, founded in 2009 by Xu Yirong, runs an online marketplace selling clothes, shoes and handbags. (SD-Agencies)