Alibaba Group Holding Ltd (NYSE:BABA)’s Investment In Suning Is To Merge Online And Offline Retail

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Alibaba Group Holding Ltd (NYSE:BABA) continues to enrich and widen its e-commerce platform. In the latest move, the company is taking a stake in famed electronics retailer Suning Commerce Group to connect its customers to more useful offline stores. Alibaba will invest nearly $4.63 billion in Suning and acquire a stake of about 20% in the electronics retailer.

Chinese e-commerce providers are in the race to blur the line between online and offline retail businesses. The companies are implementing features and entering partnerships to widen the access of online stores for their customers. The idea is to improve user experience. Alibaba’s dealing with Suning is aimed to achieve just that and perhaps more.

Improving electronics retail segment

Alibaba’s main competitor, JD.Com Inc (ADR) (NASDAQ:JD), has its domain in retailing electronics products. Therefore, partnering with Suning is also expected to enable Alibaba to catch up with JD in areas it may have been lacking. That boost would be in addition to the benefit of exposing shoppers to a wider selection.

Logistics boost

Suning has a nationwide footprint in China, operating logistic centers in some 2,800 markets that include counties and cities. The company runs over 1,600 brick-and-mortar stores in 289 cities in China. As such, Alibaba Group Holding Ltd (NYSE:BABA) will benefit from an extensive logistic network to improve customer deliveries and drive more shipping efficiency.

Suning will operate a store on Alibaba’s third-party marketplace called Tmall. The store will sell home appliances, consumer electronics and baby products. Shoppers will be able to use Alibaba’s Alipay service to pay more purchases in Suning’s stores.

Acquiring stakes

Besides Alibaba Group Holding Ltd (NYSE:BABA) taking up a stake of 19.99% in Suning, the latter will also take up a small stake in Alibaba. Suning will invest some $2.28 billion to accumulate 27.8 million shares in Alibaba, giving it 1.1% stake in the e-commerce titan.

With the partnership with Suning, Alibaba is hoping to tackle its rival, JD, in their own game.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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