Alibaba And Suning To Pour In Millions To Fund Their Incubator Project

摘要: Since the cooperation established in August last year, Alibaba and Sunning have been working together on the integration of their e-commerce, logistics, and service systems. At present, the two companies are reaching out to the outside world and launching their incubator project.

(Chinese Version)

Suning’s chairman of the board Zhang Jindong and Alibaba’s CEO Zhang Yong

Suning’s chairman of the board Zhang Jindong and Alibaba’s CEO Zhang Yong

Since the cooperation established in August last year, Alibaba and Sunning have been working together on the integration of their e-commerce, logistics, and service systems. At present, the two companies are reaching out to the outside world and launching their incubator project.

On June 1st, Alibaba and Suning Commerce Group jointly announced to make their user, data traffic, and big data resources available to the industry, and that they would pour in at least 10 billion RMB to fund small and medium-sized startup incubators and the reconstruction of brand supply chain.

Currently, there are brands of million-level scale on their platform, including renowned companies such as Midea, Haier, Samsung, Hisense, Huawei, and Xiaomi etc., that aim to achieve an annual sales volume of 50 billion RMB in 3 years with the support of this initiative. Brand names such as Lenovo, SIEMENS, Sony, Skyworth, and Canon etc. have already had a annual sales volume of 5 billion RMB and they are aiming to achieve 20 billion RMB in 3 years.

How to incubate brands?

“If this channel can help brands get feedbacks from the clients, share the big data, and help us better understand the clients’ demands to build more customized products, then it would be worth it,” Lenovo Group’s CEO and chairman of the board Yang Yuanqing said. “Besides that, the channel should also be a platform where the brands can sell their products more efficiently to the clients. If the brands can sell out their inventories in 10 days while it would take them 100 days on other platforms, then it’s a success.”

To achieve such goals, Alibaba and Suning have also brought about their solutions.

Firstly, both sides share many common goals: improve the supply chain and lower the logistics cost to 30%; extend the warehouse space to ten million square meters in three years and establish cooperation with Cainiao Logistics; launch other service products such as the half-day delivery service which has been introduced to six cities in the country and provide 30-days return service for all merchandise etc.

Further more, the brand marketing strategy of Tmall will be based on the incubating of content, which will connect brands, sellers, merchandise, buyers, fans, and networks, aiming to help brands target their audience and nurture their fan base.

Alibaba’s CEO Zhang Yong believes that the 3 trillion RMB from Alibaba last year was a beginning of the comprehensive fusion of Suning and Alibaba’s different business forms. He hopes that Alibaba would not only achieve its 3-trillion target online, but also help boost the total volume of retail sales of China from 30 trillion to 300 trillion.

As a matter of fact, with Tmall-Taobao’s user base, inventory, and service system, Alibaba has been helping brands run full channel operations. The join of Suning would be a well offline supplement in this sense.

Statistics show that Suning Logistics now has a warehouse space of 4.55 million square meters, 1,600 offline stores, and 5,500 customer service centers across the country. Last year, Suning launched 1,011 O2O direct sales stores scattered through over 1,200 counties in the country.

To further penetrate the rural market, Suning plans to pour in another 5 billion RMB to build 1,500 direct sales stores and 200 online stores that feature local specialties and train 100,000 e-commerce professionals. The number of Alibaba’s Taobao service centers in the rural market has also hit over ten thousand, covering more than 20 provinces in the country.

So are Alibaba and Suning getting along 10 months after the cooperation has been established?

On August 10th last year, Suning and Alibaba reached a cooperation agreement after two months of negotiation as both sides have something special to offer to each other.

Suning Commerce recently announced that the strategic cooperation of the two companies has finished the delivery phase. In the end, Taobao poured in 28.233 billion RMB and subscribed to 186.1 million non-public stocks at the price of 15.17 RMB per stock, accounting for 19.99% of Suning’s total stock. On the other hand, Suning has paid Alibaba all the stocks the company had subscribed to, USD 2.146 billion in total, and subscribed to Alibaba’s 26.32 million newly issued stocks, which account for 1.055 of Alibaba’s total stocks.

The cooperation between Alibaba and Suning, the dominant player and the top three player in the e-commerce sector, is expected to break current e-commerce industry layout in China. In the last ten months both sides hadn’t released much details about the development of their cooperation. However, in the recent press conference, Suning Commerce’s COO Hou Enlong and Tmall Appliance’s CEO Yin Jin made a briefing of the progress, stating that they had standardized over 6000 merchandise’s price both online and offline and achieved the share of stock of the online and offline outlets, allowing the consumers to choose the merchandise according to their preference and location.

7 days after the cooperation had been established, Suning’s flagship store came online on Tmall. During the Doubel Eleven Shopping Festival, Sunning even made it into the top three on the leaderboard on Tmall.

Within 45 days, Alibaba connected to Cainiao Logistics and Suning Logistics.

In April this year, Suning connected its customer service, to-door services and some other minor services with Alibaba.

Teaming up with Alibaba has helped Suning attain a fast growth in the online business sector. According to Suning’s annual fiscal report, Suning Commerce achieved a taking of 135.548 billion RMB, a year-on-year increase of 24.44%. It’s worth noting that the transaction volume brought by Suning’s online businesses hit 50.275 billion RMB, a 94.93% jump compared with last year.

“So far the cooperation is pretty much in the honey moon phase, however, they need to work on the challenges they face together and find ways to make it through the seven-year itch that is soon to come,” Yang Yuanqing said, commenting on the cooperation. “After all, only the ‘couple’ would know if they are happy or not in a ‘marriage’.”

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[The article is published and edited with authorization from the author @Wang Xuan, please note source and hyperlink when reproduce.]

Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.

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