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Alibaba acquires 20% stake in Suning for $4.63 billion

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MUMBAI: Alibaba Group Holding is all set to invest approximately $4.63 billion (RMB28.3 billion) for a 19.99 per cent stake in China’s consumer electronics retail chains Suning. After the closing of the investment in Suning, Alibaba will be the second-largest shareholder in the company.

Concurrent with Alibaba’s investment in Suning, Suning will invest up to $2.28 billion (RMB14 billion) to subscribe for up to 27.8 million newly issued ordinary shares of Alibaba. After the investment, Suning will hold approximately a 1.1 per cent interest in Alibaba’s enlarged issued and outstanding share capital.

The strategic collaboration between Alibaba and Suning marks a milestone that signals the further integration of digital and offline retail. The collaboration will bring benefits to hundreds of millions of Chinese consumers who use Alibaba’s online platforms and Suning’s offline channels. By cooperating, Alibaba and Suning will be able to provide holistic and more convenient shopping experiences, as well as superior customer service to users looking to purchase online and through mobile devices.

As part of the transaction, Alibaba and Suning have entered into an agreement to build on synergies in e-commerce, logistics and incremental business through joint omni-channel initiatives. Under the collaboration, Suning will open a flagship store on Alibaba’s Tmall.com platform, focusing on consumer electronics, home appliances and baby products. The store will offer high-quality product offerings at attractive prices and an unparalleled superior shopping experience. Suning’s flagship store will be a major win for Tmall.com, and reflects Tmall’s status as the premiere platform for brands and retailers who wish to establish their online presence and direct engagement with customers.

In the area of logistics, Suning will become a partner of Cainiao, Alibaba’s logistics affiliate and Suning’s logistics services cover almost all of the 2,800 counties and districts in China. Suning boasts a nationwide logistics network covering over 90 per cent of China’s counties including eight national distribution centers, 57 regional distribution centers, 353 city forwarding centers and over 1,700 last-mile delivery stations. With Cainiao’s intelligent delivery solutions and Suning’s well-developed distribution network, customers can expect to receive their orders in as fast as two hours in the near future.

This collaboration highlights how Alibaba Group’s unrivalled leadership in mobile commerce and payments makes it possible for offline retailers to have an aggressive and successful omni-channel strategy. This collaboration brings together a strong bricks-and-mortar operation with an extensive online customer base and resources. Capitalizing on Suning’s extensive network of offline stores and leveraging Alibaba’s edge in data technology, both parties can explore online-to-offline and offline-to-online commerce opportunities that better serve customer needs and preferences. The collaboration will provide many tangible benefits to consumers. For example, consumers will be able to have a physical experience with the product in store, while at the same time being able to operate other areas – such as ordering and payment – through their own mobile device. Not only will customers be able to enjoy the tremendous amount of offerings and pay directly via the Alipay Wallet on their mobile device, they will also be able to experience the products and after-sale services in person in Suning’s over 1,600 physical retail stores in 289 cities across China. In addition, Suning’s retail stores, as well as its over 3,000 after-sales service locations and over 5,000 affiliate servicing partners in 320 cities across China will also be able to perform important after-sale maintenance or repair services to Tmall consumers.

Alibaba Group executive chairman Jack Ma 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.”

Alibaba Group CEO Daniel Zhang added, “We are seeing the integration of e-commerce with traditional commerce where consumers are able to enjoy a more engaged, omni-channel and seamless shopping experience. Customers will be able to enjoy the vast online offerings while having convenient access to physical stores. By maximizing Suning’s bricks-and-mortar assets with Alibaba’s vibrant ecosystem, we are in the best position to provide the ultimate shopping experience for all our customers.”

Suning chairman Zhang Jindong said, “The collaboration between Alibaba and Suning is a milestone in China’s retail industry and its influence on e-commerce and offline retailing will be enormous. 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.”

Suning vice chairman Sun Weimin added, “We believe the strengths of Alibaba and Suning complement each other. By exploring standards and models in the O2O sector, we hope to bring real benefits to Chinese consumers.”

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