Amid O2O push, Alibaba buys 20pc stake in brick-and-mortar retailer Suning for US$4.6b

PUBLISHED : Monday, 10 August, 2015, 6:34pm
UPDATED : Monday, 10 August, 2015, 6:37pm

Chinese e-commerce giant Alibaba has forked out 28 billion yuan (US$4.63 billion) to purchase a nearly 20 per cent stake in brick-and-mortar electronics retailer Suning, as the online sales powerhouse targets greater offline integration.

The investment, which comes as Alibaba is due to report its earnings for the quarter ending June 2015, cements the Hangzhou-based firm's position as the second-largest shareholder in Suning.

Suning will also invest up to 14 billion yuan in newly issued ordinary Alibaba shares, giving the electronics retailer up to a 1.1 per cent stake in Alibaba.

Brick-and-mortar retailer Suning will also open a flagship store on Alibaba's consumer focused, selling electronics, home appliances and baby products.

“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,” said Jack Ma Yun, executive chairman and founder of Alibaba Group.

Alibaba and Suning also agreed a logistics resource sharing deal. The Nanjing-based electronics company will become a partner of Cainiao, Alibaba’s logistics affiliate, and contribute its well-developed logistics network to speed up deliveries to as quickly as two hours in the future.

Cainiao is a consortium of the largest e-commerce and logistics companies in the country, including Shenzhen-based courier service SF Express and China Post.

The Alibaba-Suning alliances comes as Chinese tech firms are moving heavily into the online-to-offline space, leveraging e-commerce and social connectivity for more traditional business models.

China’s largest internet companies, Alibaba, Baidu, and Tencent, have all made large investments in O2O.

Baidu said last week that it was investing in O2O laundry service company Edaixi, which picks up, washes and returns user's washing within 72 hours of an order being placed in its app.

The search firm also announced in June a 20 billion yuan (US$3.2 billion) investment in expanding its Baidu Nuomi Groupon-style platform.

Alibaba and Tencent are also going head-to-head in the food delivery services market.

Tencent-backed Eleme and Alibaba-backed Meituan Waimai, which allow users to order restaurant meals online that are delivered to their doorstep, collectively hold almost 75 per cent market share in the food delivery sector, according to market research firm Analysys. Eleme leads the market with 40 per cent market share.

In June, Alibaba announced that it would spend about US$1 billion to establish another food-delivery service, Koubei.