E-COMMERCE: Alibaba, Suning in JV; Wal-Mart Ties Grow with JD.com

By on

Bottom line: Wal-Mart’s deepening alliance with JD.com looks like a smart pairing of leaders in traditional and online retailing, while a new e-commerce joint venture between Alibaba and Suning doesn’t appear to offer anything new.

Wal-Mart opens Sam’s Club on JD.com

Leading Chinese e-commerce operators Alibaba (NYSE: BABA) and JD.com (Nasdaq: JD) are in a series of similar headlines, as each looks for growth opportunities by pairing with traditional brick-and-mortar retailers. Industry leader Alibaba has just announced a rather vague joint venture with leading electronics retailer Suning (Shenzhen: 002024), a year after the pair formed a major equity tie-up. Meantime, JD.com has announced that global retailing giant Wal-Mart (NYSE: WMT) will open 2 major stores on its e-commerce platform, as part of a growing alliance between the pair that also kicked off with a major equity tie-up 3 months ago.  

Among these 2 growing alliances, I’ll openly admit I find the one between JD and Wal-Mart far more interesting than the Alibaba-Suning pairing. That’s because Wal-Mart has huge global connections and vast experience in traditional retailing, meaning it has lots to potentially offer JD. By comparison, Suning is mostly a Chinese retailer with roots in home appliances and electronics, and its brick-and-mortar shops are rapidly fading in China.

This pair  of stories comes against a bigger backdrop of the upcoming Double 11 Singles Day holiday, which has become an online shopping extravaganza comparable to Christmas in the west. Alibaba has just launched its own countdown to the day, which falls on November 11, and JD is also likely to step up its promotional activity in the remaining 3 weeks  before the date.

Against that backdrop let’s begin with the JD-Wal-Mart tie-up, which began earlier this year when the US giant offered its struggling Yihaodian China e-commerce business in exchange for a stake in JD. Since then, Wal-Mart has increased that stake and now holds  about 11 percent of the Chinese company.

The latest headlines say Wal-Mart is launching a flagship version of its Sam’s Club store and a Walmart Global Imports store on JD.com. (company announcement; Chinese article) It is also launching 2-hour delivery for products from its brick-and-mortar stores in some cities, using JD’s advanced infrastructure of warehouses and vehicles  that make such quick deliveries possible.

Wal-Mart is pointing out that its access to JD’s infrastructure will give 90 percent of Chinese consumers access to its products — something it could never achieve through its traditional store network. This alliance really does look like a potential game changer in China’s retailing landscape, since it brings together Wal-Mart’s huge product offerings with JD’s expertise in selling products online and quickly delivering them to customers.

Vague Joint Venture

Next there’s the Alibaba-Suning alliance, which comes in the announcement of a new joint venture that looks quite modest and vague. (Chinese article) The venture has a total investment of 1 billion yuan ($150 million), and Suning will hold a majority 51 percent stake with Alibaba holding  the rest. There’s very little detail on what exactly will set this particular venture apart from Suning’s existing e-commerce business. Alibaba doesn’t directly own any  e-commerce businesses, but instead operates online shopping malls where other merchants can sell their wares.

Alibaba and Suning first announced their alliance more than a year ago, when the former agreed to pay 28.3 billion yuan for about 11 percent of the latter. At the same time, Suning paid  14 billion yuan for a more modest modest 1.1 percent stake of Alibaba.

The original pairing was one of Alibaba’s largest investments at the time, as it looked for ways to boost its industry dominating position by tying with one of China’s  top traditional retailers. It now appears that the companies didn’t have a real vision of how exactly their partnership would evolve, and that this joint venture is the best they could find after a year of exploring various possibilities.

We’ll have to see what exactly the new venture ultimately offers and how it differentiates  itself from Suning’s existing site, which has never really emerged as a major force in China’s e-commerce scene. It’s possible the new venture could offer something different and compelling to shake up the space, though this latest announcement doesn’t provide anything to get too excited about.

Related posts:

(Visited 409 times, 1 visits today)