For Jack Ma, executive chairman of Alibaba Group Holdings, today is an extremely busy and lucrative day because the company he founded 15 years ...
Suning’s plans including opening a tech center in Silicon Valley this year.
Suning Commerce Group Co Ltd., a leading retailer of consumer electronics in China, has unveiled plans to expand its online sales and more closely connect its store and web operations. That includes allowing a limited number of major brands to sell on Suning.com, creating a marketplace that may feature less of the price competition that’s common on competing shopping portals in China.
Suning, No.5 in the Internet Retailer Asia 500 guide, this month launched its “Suning Cloud” marketplace, with more than 300 merchants now selling on Suning.com. That includes such international brands as apparel maker H&M, PC manufacturer Lenovo and consumer electronics company Samsung.
Aiming to limit competition among merchants on its marketplace, Suning says it will recruit only a limited number of premium brands to sell in each category. Suning says it will keep the total number of third-party sellers on its site to under 10,000 this year and to no more than 50,000 by 2015. After 2015, the recruiting will focus on overseas brands that don’t already sell in China.
"Limiting the merchants in the same category provides a healthy competition opportunity for brands and helps us maintain premium service quality to consumers," Li Bin, vice president of Suning.com, says. Keeping competition in check could address complaints by many brands that they’re forced to discount heavily because of stiff pricing competition on major Chinese e-commerce marketplaces like Tmall and Jingdong. Tmall is a unit of Alibaba Group, No. 1 in the Asia 500; Jingdong is No. 3. There are 50,000 storefronts on Tmall representing 70,000 brands, Alibaba says.
Brands selling on Suning.com will pay fees of 2% to 5% of the value of the merchandise sold, although Suning says it will refund the transaction fee to merchants in some categories. The fees are in line with what Tmall charges. However, Suning says it will not charge any up-front fees. A merchant that opens a store on Tmall must put up a security deposit of 50,000 yuan ($8170) to 150,000 yuan ($24,510) and pay an annual fee of 30,000 yuan ($4902) or 60,000 yuan ($9804).
Starting as a Best Buy-like electronics retailer in 1990, Suning launched its e-commerce site in 2009 and has taken several steps since to enhance online business. The Nanjing-based company acquired e-retailer Redbaby.com in 2012 to expand into beauty and children’s categories. Suning also reorganized its management to give more emphasis to e-commerce and and integrated its 1,614 stores with Suning.com. Now the two channels have common systems for managing pricing and inventory.
“Suning is not only a store chain or an e-retailer, but also an e-retailing service providers. In the future, our major profits will come from financial services, logistics services and data analysis to merchants, not from the price difference between wholesale and consumer,” says Sun Weimin, vice-president of Suning Commerce Group.
The retailer also unveiled an investment plan designed to help it reach its e-commerce goals.
Much as U.S. office supplies chain Staples Inc. is doing in two pilot stores, Suning plans to redesign 100 of its stores this year to better show off merchandise available on Suning.com. Merchants that sell on Suning’s e-commerce site will be able to display their merchandise in these “Suning Expo” stores, either in physical form or through videos or QR codes that consumers can scan to access online information. The retailer will provide computers and tablets to enable consumers to compare store and online prices, and promises to match prices of major online rivals. Those stores also will serve as pickup points where consumers can collect online orders.
Suning, which had 15 regional fulfillment centers and three storage warehouses as of June 2013, says it delivers orders in most cities in less than two days. By 2015, the company says it plans to offer express delivery in 5,000 Chinese cites through a network that will boast 60 fulfillment centers, 12 storage warehouses, 10,000 vehicles and 50,000 delivery workers.
The company also plans to expand its I.T. development staff from 4,000 to 10,000 by 2015. Suning has two research centers and will open three new centers by the end of 2013, including one in Silicon Valley for researching data mining, cloud computing and web search technology.
Suning’s online sales reached $1.73 billion in the first half 2013 and the company has set a goal of reaching 300 billion yuan ($49 billion) in annual sales by 2020. According to iResearch, a Beijing-based research firm, in Q2 2013 Suning had a 5% share of the business-to-consumer e-retail market market in China, behind Tmall (50.8%), Jingdong (17.1%) and Tencent Holdings (5.6%.) That B2C market calculation excludes the largest online marketplace in China, Taobao, which is operated by Alibaba and offers products from some 7 million individuals and small businesses. China e-commerce analysts typically categorize Taobao’s sales as consumer-to-consumer, or C2C.