Suning launches finance firm

China's leading home appliance retailer Suning Appliance Co announced Thursday it will set up a microfinance company in a bid to speed up the expansion of its open sales platform.

The microfinance firm will have a registered capital of 300 million yuan ($48.2 million), and the new subsidiary will handle loans, discounted bills and asset transfers for sellers on Suning's online platform, Suning said in a filing to the Shenzhen Stock Exchange Thursday.

Suning made the move just days after B2C firm 360buy.com launched a supply chain financing firm by cooperating with several domestic banks.

360buy.com has financed $1.5 billion and raised more than 5 billion yuan in credit from banks to provide accounts receivable financing and purchase order financing, the company told the Global Times in an earlier interview.

The company launched its open platform at the end of 2010 and now has more than 10,000 sellers.

Small and medium-sized enterprises (SMEs) are currently confronted with capital shortages and it is hard for them to get loans from banks, so offering loans is a good way for Suning and 360buy.com to win over sellers, Lu Zhenwang, founder of Internet consulting firm Shanghai Wanqing Commerce Consulting Co, told the Global Times Thursday.

Suning's move shows that, like 360buy.com, it has devoted significant resources to its open platform, Lu said.

Since Suning wants its place in the Chinese retail market to emulate the broad appeal of a Wal-Mart rather than the specialization of a Best Buy, it has tried to expand its categories both by making acquisitions and by establishing its open platform in July this year for sellers from various industries to distribute their products.

But Liu said that newcomers like Suning and 360buy.com can hardly compete with Alibaba's competitive edge in logistics costs and online payment.

In 2010, leading e-commerce company Alibaba became the first in China to start a microfinance business, Alibaba told the Global Times via e-mail Thursday, providing loans to members based either on their credit or on their purchase orders, usually up to 1 million yuan to be paid back within three months or less.

By the end of June 2012, Alibaba had extended more than 26 billion yuan to its 129,000 members.

It is a necessary step for B2C companies to establish a full supply chain including sales, logistics and financing services if they want to stay competitive, Feng Lin, an e-commerce researcher at Hangzhou-based China e-Business Research Center, told the Global Times Thursday.

B2C firms now compete both for consumers and for sellers, Feng said, but he expressed his doubts that microcredit will effectively help e-commerce firms win over sellers, because the annual interest rate is always high.