Alibaba doubles down on car industry to drive its ‘new retail’ strategy

The e-commerce giant led a US$335 million funding round in a start-up that is working to blend online and offline car sales in China

PUBLISHED : Wednesday, 01 November, 2017, 2:29pm
UPDATED : Tuesday, 03 July, 2018, 8:22pm

Chinese e-commerce giant Alibaba Group has set its sights on the automobile industry in its latest move to revamp the entire retail landscape by blending online and offline shopping.

The New York-listed company has led a US$335 million funding round in a Chinese start-up that provides digital sales solutions to brick-and-mortar car dealers in the world’s largest auto market.

Pure e-commerce is not going to be the best solution for car sales in China. People want to go to a store to see, touch and try out a car before they place an order
Yao Junhong, chief executive, SouChe

With its capital injection – whose size has not been revealed – Alibaba becomes the biggest institutional investor in SouChe, the Hangzhou-based start-up said on Wednesday when it announced the funding round. Warburg Pincus, Primavera Capital and CMB International also participated in the round.

“Pure e-commerce is not going to be the best solution for car sales in China,” said Yao Junhong, founder and chief executive of SouChe. “People want to go to a store to see, touch and try out a car before they place an order. Not to mention all kinds of after-sales services that can only be provided in brick-and-mortar stores.”

Alibaba seeking to reshape retail industry through big data, cloud computing

Venture-capital investment has been pouring into the online vehicle-sales industry in China, with, one of the major internet car dealers announcing US$180 million of new funding on Tuesday.

Yao said he is a firm believer that “new retail” – a concept that combines online, offline, logistics and data across a single value-chain – is the right direction for car sales.

Founded in 2012, SouChe already boasts 110,000 offline dealers as customers, about 60 per cent of China’s dealerships. It offers them digital solutions ranging from online marketing and stores to systems that can manage offline inventory and keep track of potential buyers.

“By teaming up with Alibaba, which is the dominant player in e-commerce, we can bring our offline dealers the best traffic to boost their online presence and further expand our offline retail. Together, we can build a seamless new automobile retail platform, which is expected to improve efficiency for car sales by taking full advantage of internet and big data,” said Yao. The goal, he added, is to cover 80 per cent of China’s auto dealerships by next year.

SouChe has so far raised a total of US$635.4 million through five rounds of financing including the one led by Alibaba.

Ant Financial, the online-finance major backed by Alibaba, led a US$100 million funding round in SouChe in November last year, which has already allowed SouChe to tap into Ant Financial’s data and risk-control capacities to better provide financial services for its customers.

Alibaba, which owns the South China Morning Post, is pursuing a “new retail” strategy in preparation for a so-called smart era powered by cloud computing, big data and the internet of things. It foresees the arrival of five trends – “new retail”, “new production”, “new finance”, “new technology” and “new resources”– which will change the face of retail, finance and manufacturing.