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 Alibaba is paying 28.3 billion yuan ($4.56 billion) for newly issued
Suning shares and will ultimately hold a 19.99 percent stake. Suning
will in turn invest 14 billion yuan to acquire 1.1 percent of
Alibaba through the purchase of new shares, the two said in a joint
statement.
The deal comes when Chinese companies, as well as the country's top
policymakers, have espoused combining offline and online sectors as
a lucrative new business model.
Baidu Inc, China's dominant Internet search provider, has said it
would invest $3.2 billion over the next three years in such
services, while property conglomerate Dalian Wanda Group said last
month its entertainment arm would lead a $1 billion investment in a
travel website.
Alibaba's latest alliance would, in practical terms, allow its
online customers to go into one of Suning's 1,600 outlets in China
to try out a product before purchasing it on Alibaba's website using
their smartphone.
Suning, which has long boasted a formidable logistics operation,
would join forces with Alibaba's distribution network to deliver
goods in as little as two hours, the companies said.
INTERNET STRATEGY
China's leaders have been fleshing out a broad Internet sector
strategy known as "Internet Plus" to combine online and offline
industries and encourage more technology-driven, high-value economic
output as the world's second-largest economy wrestles with slowing
growth.
For Alibaba, the alliance could reinforce its position against its
main e-commerce rival JD.com, which has traditionally enjoyed
healthy sales of electronics and gadgets. Alibaba will open a new
section dedicated to Suning on its popular TMall shopping website.
Alibaba has been seeking to strengthen its electronics offerings in
recent years, inking tie-ups with Gome Electrical Appliances Holding
Ltd and Haier Electronics Group Co Ltd to offer home appliances
online.
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Speaking to reporters on Monday, Alibaba Chief Executive Daniel
Zhang said he would consider striking more deals with
brick-and-mortar stores beyond electronics, as long as those retail
chains "can bring us additional customers."
But he maintained that Alibaba's interest in Suning did not reflect
any fundamental shift in Alibaba's strategy toward becoming more of
a physical retailer itself.
"We are trying to build an integrated online-offline platform for
both customers and merchants," Zhang said. "We don't change our
strategy. We're still a platform company."
Alibaba's Tmall faced challenges holding onto its long-held
dominance in Chinese e-commerce, said James Roy, associate principal
from China Market Research Group in Shanghai.
"From Alibaba's point of view, acquiring or having such a strategic
alliance with a fairly large competitor will help them to continue
to enjoy that strong position."
JD.com played down its rival's new partnership.
"Over 12 years we've built a reputation for amazing delivery speed
and attention to customer experience. That's why we've been able to
build a market leading position, and it's very tough to duplicate,"
JD.com said in a statement
($1 = 6.2096 Chinese yuan renminbi)
(Reporting by Gerry Shih; Additional reporting by Danny Kwok;
Editing by Edmund Klamann and Keith Weir)
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