Alibaba Group Holding Limited announced Monday that it will be investing in Suning Commerce Group Limited, one of the biggest retail chains for consumer electronics in China. Having spent $4.63 billion, Alibaba will be gaining a 19.99 percent stake in Suning, making it the second-largest shareholder for the company.
Alibaba will also be receiving a $2.28-billion investment from Suning, giving the latter around 1.1 percent interest in the former's enlarged issued and outstanding share capital. As part of the deal, Suning will be opening a flagship store in Alibaba's Tmall.com offering home appliances, baby products and consumer electronics. The flagship store is a great addition to the platform as it will boost Tmall.com's image as a premiere platform for retailers and brands wishing to establish an online presence and get involved with directly engaging customers.
For customers, one of the benefits of the investment deal is that they will be able to enjoy a physical experience with a product in a store while ordering and paying through their mobile devices. Aside from the convenience of paying through Alipay Wallet, customers will also have access to more than 3,000 after-sales service locations, as well as more than 5,000 affiliate servicing partners across 320 cities in China who can perform repair or after-sales services for Tmall customers. Suning retail stores will also be able to provide the same kind of service.
At the same time, Suning will become a partner for Cainiao as well, leaving to logistics services covering nearly all 2,800 Chinese counties and districts. Suning already covers more than 90 percent of China's counties but with the partnership with Cainiao, delivery services will drastically improve to a point that customers can expect their orders in as little as two hours.
"This alliance will benefit consumers and merchants by cultivating an open and transparent integrated ecosystem that will be the backbone of the future economy," said Jack Ma, executive chairman for the Alibaba Group.
As with all investment deals, Alibaba and Suning's new arrangement will be subjected to standard closing conditions, which will include regulatory approvals. Alibaba's investment in Suning will also only be realized once existing Suning shareholders agree to the terms and conditions.
Photo: Garfield Anderssen | Flickr
