Alibaba Group Holding Ltd., the Chinese e-commerce giant will invest $4.5 billion to form a partnership strategic with Suning Commerce Group Co Ltd, a Chinese electronics retailer. The deal aims to develop a “new commerce model” towards integrating online and offline (store-based) shopping.
The e-commerce company Alibaba is paying more than 28 billion yuan ($4.5 billion) for newly issued Suning shares and will ultimately hold nearly 20 percent stake in electronics retailer Suning. Through the purchase of new shares, Suning Commerce Group Ltd. will in return invest 14 billion yuan to acquire 1.1 percent stake of Alibaba Group Holding Ltd. In other words, this deal represents a net investment by Alibaba of about 14 billion yuan ($2.2 billion) in electronics retailer Suning Commerce Group Ltd.
As part of a strategic alliance, the two companies will create synergies in areas such as ecommerce and logistics. Suning, one of China’s highest-profile electronics sellers with more than 1,600 retail stores across 289 cities in China, will open a flagship store on Alibaba’s Tmall.com online platform. Moreover, Suning’s logistics network of 8 national distribution centers, 57 regional distribution centers and more than 1,700 “last mile” delivery stations will join Alibaba’s logistics affiliate, Cainiao, a network of logistics partners.
In practical terms, this alliance will allow Alibaba’s online customers to go into one of Suning’s 1,600 physical stores in China to try out a product before purchasing it on Alibaba’s website. Suning’s delivery services will be fulfilling orders not only for merchandise on its own Tmall store, but also those of other merchants and retailers in the future. The addition of Suning’s logistics services to Alibaba’s distribution network means customers will soon be able to expect to receive their orders in about two hours. Moreover, Suning’s thousands of after-sales service centers in China will also be able to cater to Tmall consumers’ repair and maintenance needs.
Thanks to this strategical partnership, Suning will expand its presence online. In addition, the combination with the services Alibaba on mobile apps such as ordering and payments to Suning’s more than 1,600 physical stores will attract more and more customers in the future. While a customer goes into a Suning’s store using an Alibaba mobile application, he experiences the product first hand, but operates the process of purchasing online. Therefore the customer doesn’t have to wait at the checkout counter.
Conclusion
Nowadays, e-commerce is an important part of Chinese consumers’ lives. This alliance of two giants of Chinese retailing brings forth a new commerce model that combines online and store-based shopping. This collaboration demonstrates a major trend of online -to-offline to e-commerce in China right now. Instead of taking on rivals that are weak where the company is strong, Suning and Alibaba are joining forces to maximize the strengths of both sides. This partnership strategic demonstrated no doubt the incremental opportunities for both Suning and Alibaba in the near future.
Zeling ZHONG Étudiante en Master 2 Gestion et Droit de l’Économie Numérique parcours Commerce Electronique de l’Université de Strasbourg, curieuse de toutes les Nouvelles Technologies de l’Information et de la Communication, je suis passionnée par tout ce qui est relatif à l’E-commerce sur le marché chinois. J’éprouve un intérêt particulier pour le marketing en ligne avec les réseaux sociaux.
