In a biggest stake deal ever Alibaba buys a stake in Suning Commerce Group Ltd for $4.6 Billion. Suning Commerce Group Ltd is China’s largest electronics stores network. This move hints interests of Alibaba’s interest in brick and mortar shops. The acquisition is Alibaba’s biggest ever, excludes the shares buy back in 2012 by Yahoo Inc.,
Alibaba’s Jack Ma is planning to increase his retail presence after the company witnessed 24% drop in company’s market value this year, hinting on the slowdown on China’s economy. With this move, both companies will partner in logistics and online sales to target 2-hour delivery.
Suning Commerce has 1,600 outlets in China’s 290 cities prominently sells electricals and electronic appliances, books and baby products. Alibaba’s Logistics partner Cainiao will partner with Suning for logistical reach cover 90% of China via eight national distribution centers, 57 distribution centers, 353 city forwarding centers and 1,700+ last mile delivery centers of Cainiao receive orders in a quicker pace.
With the stake buy of Alibaba became 2nd largest investor in the electronic major. At the same time, this works in favor of Alibaba after sales support in store for purchase made online services. In fact, Suning claims to have 3,000+ after-sales services locations and another 5,000+ through its affiliates.
Another reason for stake buy it’s a major trend of Online to Offline to e-commerce in China. Earlier Alibaba was vociferous about the old style, offline retailers now marks a major shift in Alibaba’s thinking. This move will unlock the potential of Suning enjoy in China, teaming up and expanding Alibaba’s expertise with consumers will prove profitable.
On the other hand, Suning is struggling to adapt to the latest online craze that Alibaba has generated in the sales of electronics items. Suning has incurred huge losses in the first quarter of 2015 for 332 million renminbi. However, the company has sophisticated logistics operations across China.
Last year Alibaba showed continued interest in the purchase of Intime Retail for $692 million. Intime Retail is one of Chinese Department Store operator. This clearly indicates Alibaba’s willingness to invest in a wide array of companies, starting from online mapping, video services and stake purchases in Indian mobile manufacturer Micromax.
Rival of Suning, Gome Electrical Appliances Holding Ltd has adopted a different strategy. The company has inked a deal with the founder Huang Guangyu for $1.5 billion. This gives Gome Electrical an edge in the number of outlets by 50% to 1,714 in 436 cities, a number that exceeds owned by Suning.
Alibaba’s Jack Ma said “Over the past two decades, e-commerce has become an inextricable part of the lives of Chinese consumers, and this new alliance brings forth a new commerce model that fully integrates online and offline.” He further added “This collaboration signals a new trend in the Internet age: Strengthening China’s traditional industries by leveraging the power of Internet.”
Suning Chairman Zhang Jindong said, “It will also help transform China’s manufacturing industry and broaden the global horizons of Chinese brands.”