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Alibaba to invest $4.6 billion in China electronics retailer

Alibaba Group Holding Ltd will invest $4.6 billion in top-tier Chinese electronics retailer Suning Commerce Group Co Ltd, its biggest step yet into China’s burgeoning alliances between online and offline firms.
Alibaba is paying 28.3 billion yuan ($4.56 billion) for a 19.99 percent stake in Suning, which will in turn invest 14 billion yuan to acquire 1.1 percent of Alibaba through the purchase of newly issued shares, the two said in a joint statement.
The deal comes at a time 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 online-to-offline 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, for example, 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.
China’s leaders have been fleshing out a broad Internet sector strategy 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 competitiveness against its main e-commerce rival JD.com, which has traditionally enjoyed healthy sales of electronics and gadgets.
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 on its online marketplaces.
James Roy, associate principal from China Market Research Group in Shanghai, said Alibaba’s Tmall faced challenges holding onto its long-held dominance in Chinese e-commerce.
“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.”
($1 = 6.2096 Chinese yuan renminbi)
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