Alibaba tames a growing rival with $4.6B investment in Suning

(Image: Wikimedia Commons)

Alibaba this afternoon announced it is paying RMB 28.3 billion (US$4.63 billion) to take a 19.99 percent stake in Suning, a major retailer of electronics products in China.

Suning, which was founded in 1990, is a fixture of nearly every Chinese city. The company says it has 1,600 physical retail stores in 289 cities across the nation. Aside from its offline retail business, the company has had more success than any other retailer in China in a transition to ecommerce, creating an estore that not only covers the gadgets and appliances found in its stores, but also everything from food and baby products to jewelry and furniture.

As a result of that shift to the web, Suning has one of China’s top 5 ecommerce stores – larger in scale than Amazon’s entire Chinese business.

2-hour deliveries

The Alibaba-Suning deal is about online as well as offline partnerships. Suning will open a storefront on Alibaba’s Tmall marketplace, while Suning will open up its vast logistics network to Alibaba’s Cainiao logistics platform. That will help Alibaba merchants on Taobao and Tmall to ship their items faster to buyers using the “57 regional distribution centers, 353 city forwarding centers, and over 1,700 last-mile delivery stations” that Suning has across China. “[C]ustomers can expect to receive their orders in as fast as two hours in the near future,” said Alibaba’s statement today.

The financial terms are also a two-way street. While Alibaba throws US$4.63 billion at Suning, Suning in turn will invest up to RMB 14 billion (US$2.28 billion) in Alibaba shares.

“Over the past two decades, ecommerce 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 Alibaba founder and chairman Jack Ma. “This alliance will benefit consumers and merchants by cultivating an open and transparent integrated ecosystem that will be the backbone of the future economy.”

Jack Ma: Alibaba will get big logistics boost from Suning deal. (Image: Alibaba)

“By maximizing Suning’s brick-and-mortar assets with Alibaba’s vibrant ecosystem, we are in the best position to provide the ultimate shopping experience for all our customers,” added Alibaba CEO Daniel Zhang.

The deal seems to be a way for Alibaba to tame a growing ecommerce threat while also strengthening its hand against JD, its closest rival in China.