Suning, Alibaba invest 5b yuan to accelerate shift to online shopping

PUBLISHED : Wednesday, 01 June, 2016, 9:21pm
UPDATED : Wednesday, 01 June, 2016, 9:21pm

Chinese e-commerce giant Alibaba Group and Suning, a leading home appliances and consumer electronics retailer, plan to invest 5 billion yuan (HK$5.9 billion) in a partnership aimed at shifting consumers from bricks-and-mortar retailing to the internet.

Compared with China’s total retail sales of about 30 trillion yuan a year, the 3 trillion yuan sales on Alibaba’s e-commerce platform over the past year is only a small part of it, Alibaba’s chief executive Daniel Zhang said at the partnership’s press conference in Beijing on Wednesday.

“Through the partnership between Alibaba and Suning, we hope to boost China’s retail sales to grow faster from 30 trillion yuan to even 300 trillion yuan. This can be achieved by integrating the online and offline sales channels under a digitalisation process,” Zhang said.

Alibaba last August agreed to invest 28.3 billion yuan for a 19.9 per cent stake in Suning, which has more than 1,600 physical outlets and 5,500 after-sales service centres across the nation. The deal was the e-commerce powerhouse’s biggest investment in the bricks-and-mortar retailing sector.

Over the next few years the two companies will invest in logistics and after-sales service so as to further integrate the current online sales channels with physical outlets, said Hou Enlong, chief operating officer of Suning.

We hope to boost China’s retail sales to grow faster from 30 trillion yuan to even 300 trillion yuan
Daniel Zhang, Alibaba CEO

In some lower-tier cities, traditional physical shops still dominate as consumers have yet to shift to the internet for buying home appliances and electronics, so the market potential is huge, said Yin Jing, president of the home appliances and consumer electronics business unit at Alibaba.

“We hope to link up with more traditional home appliance and consumer electronics shops with our e-commerce platform. This will help further expand our sales channels,” Yin said.

Hou of Suning said closer cooperation with Alibaba will help build a more comprehensive distribution network that benefits sales of home appliances and consumer electronics makers such as Lenovo, Haier and TCL.

The two companies will also share big data about consumption with those partnering brands which have a better understanding about the market and can improve product mix to fit consumers’ needs. “We aim to assist partnering brands to significantly boost their sales in the next three to five years. Meanwhile, we hope some smaller retailers can also grow faster, making use of our sales channels and services,” Hou said.

A 10 billion yuan incubation fund will be established under the partnership to provide technical and financial support to small and medium-sized retailers, he said.

Under the broader partnership, Suning has opened a flagship store on Alibaba’s brand-focused Tmall platform. Also, Suning’s nationwide logistics network has already teamed up with Alibaba’s logistics affiliate Cainiao Network. In addition, Suning’s after-sales service centres across the nation provide repair and maintenance for Tmall consumers.