Alibaba’s going omnichannel — the Chinese way.
In keeping with some recent prodding from the very top of the Chinese government, the e-commerce giant is linking up with one of the country’s traditional retailers, the 1,600-door electronics chain Suning Appliance Company Ltd., for a far-reaching clicks-to-bricks collaboration.
Under terms of the deal, Alibaba will spend $4.6 billion to buy a 20 percent stake the 25-year-old chain. Alibaba gains access to Suning’s 1,600 stores and its logistics expertise, expanding its own capabilities and creating a physical touchpoint.
Suning will, in turn, invest $2.3 billion in Alibaba and open a store on the company’s Tmall marketplace that will sell consumer electronics, home appliances and baby products. Suning’s logistic network covers 90 percent of China’s counties with 57 regional distribution centers, 353 city forwarding centers and over 1,700 last-mile delivery stations and will team up with Alibaba’s own logistics affiliate.
Jack Ma, the executive chairman and public face of Alibaba, said: “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. This alliance will benefit consumers and merchants by cultivating an open and transparent integrated ecosystem that will be the backbone of the future economy.”
Suning’s chairman, Zhang Jindong, added: “This collaboration signals a new trend in the Internet age: Strengthening China’s traditional industries by leveraging the power of Internet. It will also help transform China’s manufacturing industry and broaden the global horizons of Chinese brands.”
That sentiment is very much in keeping with the country’s “Internet Plus” action plan, which was first introduced by Premier Li Keqiang in March and laid out in more detail last month.
The plan seeks to bring together the mobile Internet, cloud computing, big data and the Internet of Things with modern manufacturing to build up e-commerce businesses and help them increase their international presence.
“The government aims to further deepen the integration of the Internet with the economic and social sectors, making new industrial modes a main driving force of growth by 2018,” according to the action plan.
The Chinese economy enjoyed years of supercharged growth while the rural population moved to the manufacturing centers along the coast. And while the country’s growth is still impressive by Western standards, its 7.4 percent expansion last year was the weakest in 24 years and has its leaders looking for the next big thing to propel the economy forward.
As a growth avenue, digital commerce makes sense. The country has 649 million Internet users, according to the China Internet Network Information Center data.
Alibaba is the first Chinese Web company of real scale to make a global impact.
The company raised a record $25 billion in a blockbuster initial public offering on Wall Street last year, but the higher profile has also seen it fending off increasing criticisms from Kering and others that it provides a marketplace for counterfeiters to peddle their wares.
Alibaba will report its fiscal first quarter results on Wednesday. Analysts are looking for the company’s sales to grow 33.6 percent to $3.4 billion. The company does not own goods itself, but provides a venue for merchants and consumer connect and through affiliates also provides financing and back end logistics support.