Alibaba said on Monday it will take a 19.9% stake in Suning, a brick-and-mortar electronics retailer with more than 1,600 stores in 289 cities in China, covering 90% of the vast country. Suning. for its part, is also taking a 1.1% stake in Alibaba for some $2.28 billion.
The Chinese giant will invest $4.63 billion in Suning, which includes a logistical network of eight national distribution centers, 57 regional distribution centers, 353 city-based fulfillment centers, and more than 1,700 last-mile delivery posts in addition to its stores.
Without getting specific, Alibaba said that Suning stores will help its customers have a “physical experience” with products and customer service.
With this move, Alibaba is busting many people’s expectations and undermining comparisons to Amazon. Unlike Amazon, the Chinese e-retail giant is shifting quickly to align with physical retail stores and create the kind of omni-channel synergies that are mainly coming from brick-and-mortar retailers in the U.S.
The partnership positions Alibaba and Suning to compete with JD.com, a leading electronics retailers with a strong online presence. Suning has grappled with online expansion, but this move should significantly bolster its e-commerce capabilities. The partnership gives Suning access to Alibaba's logistics arm Cainiao for fast deliveries and payments service Alipay for in-store purchases, as well as enabling customers to have Suning repair products from Alibaba's Tmall marketplace in their stores.
The move showcases Alibaba's omni-channel strategy to fuse online and offline shopping into one seamless experience, Joe Tsai, Alibaba's executive vice-chairman, told the Financial Times. “You can imagine a customer going into a store using an Alibaba app, experiencing the product first hand, but operating the whole purchase online so he doesn’t have to wait at the checkout counter,” he said.
For U.S. retailers partnering through Alibaba’s marketplaces, this could ultimately mean opportunities to have a physical retail presence in China without having to open stores, though neither Alibaba nor Suning have delved into the specifics of the partnership yet.
“This collaboration signals a new trend in the Internet age: Strengthening China’s traditional industries by leveraging the power of Internet,” Suning chairman Zhang Jindong said in a statement. “It will also help transform China’s manufacturing industry and broaden the global horizons of Chinese brands.”