Alibaba and Suning Partnership Could Change China's E-commerce Domination
China e-commerce industry is worth $2.1 trillion in 2014 with the number of users growing by 31.4 percent as reported by China E-Commerce Research Center (CERC). Out of the total amount, $450 billion comes from the online retail business alone. Current market players in the e-commerce are Alibaba, JD.com, and Suning Commerce.
Alibaba's latest partnership with Sunning was announced on early August this year where both companies agreed to buy a stake in each other companies is expected to boost their revenues. Both companies will expect to have mutual benefit from this partnership as their aim is to focus on "Offline to Online" strategy (O2O).
Through this partnership, Suning is expected to benefit from Alibaba's traffic to gain more customer for their own online store. Suning which operate chains of physical stores across China is entering into the online business as a way to increase its revenue after sales drop due to customer's preference to test the product in store and buy them for a cheaper price online.
For Alibaba, the partnership means it can make full use of Suning's 5,000 after-sale service centers to improve its logistic system. A better logistic system is needed by Alibaba to ensure its product can be delivered quickly to customers including rural area. Alibaba had set up their own logistic system known as Cainiao and the latest partnership will speed up the development process of the logistic system. Alibaba was also reported by South China Morning Post to have signed a deal with US Postal Service for its logistic solution in the US.
Another big player in e-commerce is JD.com. According to Forbes, currently JD.com dominated the e-commerce industry in China with its 2015 second quarter earnings of $7.4 billion in revenue accounting for 60 percent of total market domination. According to Forbes, the latest earning shows that JD.com revenue growth at 60 percent annually while Alibaba growth is only 30 percent.
Other than Alibaba, Suning also is in partnership with Wanda, China's largest property developer for their O+O strategy. While JD.com sell 15 percent of its stake to Tencent allowing the company to grow its subscriber to 70 percent with 20 percent of the new subscribers' come from Tencent.
Besides of e-commerce sales, lots of companies is competing in providing third-party payment platform to cater the online transaction. Current market players in terms of market domination as cited by China Economic Review are Alibaba's Alipay (49.6%), Tenpay (19.5%) and Chinaums (11.4%). The total market value for this sector alone is worth around $2.1 trillion.
To compete with JD.com, Alibaba is also planning to tap into a niche retail market which is home appliances market. According to a data, China home appliances online transaction increases to the highest record of 64 percent this year. The recorded transaction was reported to be around 136.1 billion yuan. It is also reported most of the customer prefer to experience the product first hand offline before purchasing it online at a lower price.
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