Suning Links With Vancl, 24Quan Shutters 苏宁易购联手凡客诚品 24券暂时停业
New signs of consolidation are appearing in the overheated in e-commerce and group buying spaces, with Suning.com (Shenzhen: 002024) again emerging as a potential major consolidator in e-commerce as a mid-sized group buying site named 24Quan closes up shop. The e-commerce news is easily the more interesting of these 2 bits, as China’s group buying sector has largely run out of cash by now and most players are tottering on the brink of insolvency. By comparison, the e-commerce field is backed by a big number of cash-rich companies like Suning, Alibaba and Amazon (Nasdaq: AMZN), which have indicated they are prepared to lose big money for a long time to defend and build their positions in a country likely to become the world’s biggest e-commerce market in the next 5-10 years.
So let’s look at the e-commerce news first, which has media reporting that Suning.com has reached deals that will see several other major e-commerce players sell their products on its platform, most notably clothing retailer Vancl. (Chinese article) This kind of agreement marks a departure from Suning.com’s more traditional model of offering mostly its own merchandise on its site, similar to what most of its major rivals do. Instead, it looks a bit more like Alibaba, which doesn’t sell any merchandise directly but instead operates several platforms where third-party merchants can set up online stores and sell their products.
Suning.com’s agreements are just the latest in a series of new tie-ups between the company and other merchants. Last month the company acquired children’s apparel seller RedBaby.com for $66 million, and media reported last week the company was in late stage talks to buy men’s apparel maker Masa Maso. (previous post) This latest reported tie-up with Vancl would be consistent with Suning.com’s recent drive into the apparel industry.
What’s more, I wouldn’t be surprised to see Suning even take an equity stake in Vancl, which is reportedly in desperate need of cash after it had to abandon plans for a New York IPO last year due to poor market conditions. By comparison, Suning is relatively cash-rich, drawing on its profitable older business of brick-and-mortar electronic appliance stores and also its recent plan to raise 8 billion yuan, or about $1.25 billion, through its first-ever corporate bond offering. (previous post)
If Suning is indeed embarking on an acquisition binge, it should be able to find plenty of bargains among the many money-losing e-commerce companies that are desperate for cash. But I would also advise the company to be prudent with its purchases, which it seems to be doing so far by focusing mostly on premium brand names.
Meantime, media are also reporting on what looks like the demise of mid-sized group buying site 24Quan, in the latest sign of much-needed consolidation for the overcrowded and overhyped space pioneered by US-based Groupon (Nasdaq: GRPN). (Chinese article) A check of 24Quan’s website informs visitors that the site has entered a period of “temporary excursion”, blaming the move on an equally cryptic “misalignment of interest and ideology” between its managers and shareholders.
The entertaining message goes on to state the company hopes to resume service in the next few weeks after it resolves its problems. Of course that means that anyone who is owed merchandise or money from 24Quan will probably never get it. In the meantime, I’m still waiting patiently for reports of the final downfall of former industry leader LaShou, which has been surprisingly quiet these last few months as it enters what I suspect is the final period before it is either acquired or forced to follow a similar path to 24Quan’s.
Bottom line: Suning.com’s new tie-up with Vancl could foreshadow an equity purchase or acquisition of the latter by the former, while closure of 24Quan reflects an ongoing cleanup in group buying.
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