E-Commerce: Jingdong, Suning, Alibaba 电商：京东商城、苏宁易购、阿里巴巴
After a brief quiet spell, e-commerce is suddenly splashing back into the headlines on several fronts, with big news coming from the sector’s top 3 players, Alibaba, Jingdong Mall and Suning.com (Shenzhen: 002024), as each chases new business. Alibaba leads off the headlines with word that it’s preparing to launch a major new promotion on its popular TMall platform; while Jingdong is getting ready to launch a major overseas foray; and last but perhaps most interesting is Suning.com, which is chasing a new acquisition.
Let’s start with Suning.com, as that deal looks the most interesting to me as it points to building consolidation for an overheated e-commerce sector where many mid-sized and smaller companies are quickly running out of cash. Media are reporting that Suning is in late-stage talks to buy online men’s fashion retailer Masa Maso. (English article; Chinese article)
Some readers may recall that reports earlier this year said Masa Maso had slashed its advertising budget by 50 percent, indicating the company was running out of cash amid non-stop competition in China’s e-commerce sector. If this report is true, the deal would mark the second purchase of an apparel company by Suning.com, following its acquisition last month of RedBaby.com.cn for $66 million. (previous post)
Suning is no doubt using its recently raised big cash pile to purchase other struggling e-commerce firms, and it appears the company has targeted apparel for its acquisition drive. There are certainly many fashion companies out there in need of cash, including Vancl, which has had to postpone a planned IPO for a year due to weak market sentiment.
Meantime, Jingdong Mall, which also goes by the name 360Buy, is launching yet another major initiative with word that it’s planning a global expansion as it aims to become the next Amazon.com (Nasdaq: AMZN). (English article) The company has immediate plans to launch an English language website, and is aiming to expand its presence into 36 countries, according to an executive in charge of executing the plan.
I won’t discuss this plan too much here, except to say that it looks like yet another foolish initiative outside its core business from Jingdong, which seems to love launching such new money-losing initiatives as it rapidly burns through its sizable cash pile. Of China’s major e-commerce companies, none has had much success outside of their home market due to competition from well-established players in most other countries, especially in the west. Perhaps Jingdong can succeed where others have failed, but I wouldn’t bet on it.
Last let’s take a look at Alibaba, which is making its own headlines with word that it’s TMall platform is coordinating with its merchants to launch a major promotion for November. (English article) This promotion would follow another one by Alibaba during the summer for its electronics business, and would follow a non-stop stream of promotions by other big e-commerce companies including Suning and Jingdong, which last month launched a big price war that made national headlines.
Even Internet leader Tencent (HKEx: 700) is playing the game, with word earlier this month that the company is planning its own major promotion for its newly formed e-commerce division. (previous post) All this activity in e-commerce is hardly new for China, and I expect we’ll see more M&A and aggressive promotions in the year ahead.
Bottom line: New M&A by Suning and a major promotion by Alibaba reflect stiff competition in e-commerce, with many more similar activities likely in the year ahead.
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