Suning to strengthen logistics, finance units

Company strives to boost profitability amid recurring losses

Suning Commerce Group, one of the country's largest home appliance retail chains, announced Wednesday that it has established a logistics group and a finance group to increase its competitiveness in the Internet sector, after it posted losses for five consecutive quarters.

A 200,000-square-meter warehouse is under construction in Nanjing, capital of East China's Jiangsu Province, where the company's headquarters is based. Once completed, it can store 20 million products and achieve daily shipment of 1.81 million parcels, the company said in a statement sent to the Global Times Wednesday.

Suning said the launch of the logistics group will help it improve logistics and storage services provided to third-party firms.

"The logistics system is part of infrastructure for the e-commerce business, so investment in the logistics capability will help Suning's transformation into an offline-to-online retailer from a traditional retail chain," Mo Daiqing, an analyst with the China E-Commerce Research Center (CECRC), told the Global Times Wednesday.

Suning has also seen opportunities in the Internet finance sector. It will focus on developing consumer-based financial services including payment, consumer finance and wealth management, with the aim to become one of the leading players in the country's Internet finance sector within two years, the statement said.

The move came after Suning got approval from the China Banking Regulatory Commission in mid-December to establish a consumer finance firm.

Suning also released a wealth management product Lingqianbao in January 2014. The product delivered a 5.08 percent annualized return rate in 2014, higher than similar products offered by Internet giants Alibaba Group and Tencent Holdings, according to the CECRC.

Analysts believe it is not easy for Suning to achieve the goal.

"Suning still lacks a large online customer base compared to Alibaba - the leader in the Internet finance sector," Wang Xiaoxing, an analyst at IT consultancy Analysys International, told the Global Times Wednesday.

Suning's online and off-line members amounted to 155 million by the end of September 30, 2014, while the number of active buyers on Alibaba's e-commerce platforms reached 307 million by then.

"But Suning's strategy reflects its aim to increase profitability, as the profit margins of the logistics and Internet finance sectors are both higher than that of the e-commerce sector," Wang said.

Suning has reported consecutive quarterly losses since the third quarter of 2013 after it decided to transition from a traditional retailer to an Internet company. The company expects its quarterly loss to drop up to 150 million yuan ($24.2 million) in the fourth quarter of 2014 from 285.97 million yuan in the third quarter.

JD.com Inc, another leading online retailer in China, also posted a net loss of 164.4 million yuan in the third quarter of 2014, down from a net loss of 582.5 million yuan in the previous quarter, according to its quarterly financial report released in November 2014.

"Suning has made the right decision to prioritize its online sales as traditional retail channels will be increasingly under pressure from the popularity of online shopping," Wang said, citing the nearly 50 percent year-on-year increase in Suning's third-quarter online revenue.

Suning ranked No.3 in China's business-to-consumer (B2C) market in the third quarter of 2014 with a 4 percent share, lagging behind Alibaba's B2C branch tmall.com with 57.6 percent and JD with 19.3 percent, according to data from consultancy iResearch.