Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
It’s a first for Suning, which plans similar facilities in Seattle and New York.
Several major U.S. retail chains have opened technology centers this year in San Francisco and nearby Silicon Valley, hoping to take advantage of the technology talent in that region. Now one of China’s largest retailers is doing the same.
Suning Commerce Group Co. last week opened its first overseas research and development center in Palo Alto, CA, in the heart of Silicon Valley. The facility employs 15 now, and the retail hopes to expand that headcount to 200 in the next few years. Suning, which has been expanding its product selection in recent years beyond consumers electronics and appliances, also says it plans to open similar development centers in Seattle and New York, and may consider opening bricks-and-mortar or online stores in the U.S. as soon as next year.
Suning chose Silicon Valley because it offers the potential to partner with leading technology firms, attract high-caliber talent, and advance cooperation between China and the United says, says chairman Zhang Jindong. “China is on pace to become the largest consumer market in the world,” he says. “Not only will Suning’s sustained, long-term investment in innovation and new retail technologies drive aggressive business growth, it will help transform China from the world’s factory into the world’s marketplace.”
Suning, No. 5 in the Internet Retailer Asia 500 guide, operates 1,600 physical stores in China and has been expanding its e-commerce operation, including buying online retailer Redbaby.com last December. The retailer reported $1.73 billion in online sales in the first half of 2013, 19.1% of its total first-half sales of $9.05 billion.
Suning’s new Silicon Valley team will focus on such areas as data mining, site search technology, cloud computing and Internet banking, the company says. Improving site search results is a priority, says Wang Jingxi, general manager of Suning's Silicon Valley R&D center. “For example, after you input ‘a Christmas gift for my mom,’ the next-generation search engine could understand your goal and then recommend relevant products to you precisely based on some background information like consumers’ ages, shopping records, shopping time, and location information in Suning’s system,” Wang says.
Furthermore, Suning aims to provide not just consumer electronics products, such as high-definition TVs, but content consumers would watch on those devices, along the lines of the streaming video services that U.S. e-retailers Netflix Inc. and Amazon.com Inc. “In the past, after selling a TV to a customer, we have nothing to do,” Wang says. “Now we hope to provide more value-added services.” Suning last month acquired Chinese online video site PPTV for $420 million. Amazon is No. 1 in the 2013 Top 500 and Netflix is No. 9.
Suning is also exploring other Internet-based services, such as video chat and a web version of Karaoke, a favorite pastime of many Chinese consumers. “We are negotiating with several music companies to get the licenses for building an Internet media library,” Wang says. “Consumers could sing together with their friends although they are in different locations.”
Suning has also applied to Chinese authorities for a banking license. Wang says “we may adopt many creative ideas to disrupt the old banking system. For example, Suning plans to consider social media as a factor when conducting a credit check on young people. If some high-credibility people follow or endorse a young man in the social media platform, the latter may receive credits and pass the credit check from Suning. Otherwise, he may not have enough physical properties to access a loan. “
The retailer also says it plans to forge alliance with U.S technology and internet firms. In 2011, Suning signed an agreement with IBM to build an advanced e-commerce platform with IBM’s server and software system. “We hope to build joint labs with large leading companies, such as IBM and Microsoft, to develop the next-generation Internet and retail technology,” Wang says.
The Chinese retailer joins a growing list of U.S. retailers opening technology centers in the San Francisco/Silicon Valley area. Wal-Mart Stores Inc., No. 4 in the Internet Retailer Top 500, has had a Silicon Valley center for more than a decade, and now employs more than 1,500 people in the area. Other retailers that have opened technology centers in the past year in the Bay Area are Target Corp., No. 18; Kohl’s Corp., No. 26; Fanatics Inc., No. 43; and American Eagle Outfitters Inc., No. 64.
In addition, Alibaba Group, China’s dominant e-commerce marketplace operator and No. 1 in the Asia 500, recently opened a San Francisco office to house a firm that will invest in e-commerce technology companies.