Suning Clicks On the Future of Retailing; Can a traditional appliance retailer with a nationwide store network metamorphosize to compete in the online shopping era?

09.11.2013 12:43

Suning Clicks On the Future of Retailing

One of China’s biggest store chains is remaking itself as an Internet retailer, apparently just in time

By staff reporter Wang Shanshan

Can a traditional appliance retailer with a nationwide store network metamorphosize to compete in the online shopping era? Suning Commerce Group Co. Ltd. Zhang Jindong thinks his company can – and that it can succeed. Over the past four years, the 1,500-store Suning chain has been pouring money into Internet sales research, website platform building and logistics system designs to prove Zhang’s point. It’s also branched into new business sectors, such as financial services, while revamping the company’s operating structure and vastly expanding its product line.Investors have cheered the initiative, driving Suning stock values steadily higher in recent months. Moreover, in May the company found friends at U.S. online retail giant Amazon, according to Suning Vice Chairman Sun Weimin, who told Caixin that Zhang participated in talks on future cooperation at the company’s Seattle headquarters.

That same month, Zhang also attended a summit of major company CEOs in Redmond, Washington State sponsored by the software giant Microsoft Corp.

Still, Suning’s transformation is far from complete. The company faces enormous challenges as a Johnny-come-lately to Internet retailing, which in China is already crowded with players such as and dominated by China’s business-to-consumer platform Taobao, a division of Alibaba Group.

Among Chinese consumers, Suning over the past 22 years built a solid reputation as a reliable seller of home appliances and electronic gadgets through traditional, big-box retail outlets. But its reputation has been growing stale while more consumers shift to shopping with a keyboard and mouse.

Suning rank-and-file employees interviewed by Caixin say the dramatic changes now underway have made them feel like uneasy. “At first, I felt like we were a stable company with steady growth,” said one worker in Beijing. “But all of a sudden, things have become extraordinarily busy and hectic.”

On the other hand, the Internet retail revolution has apparently forced Suning’s hand. Developing a successful online platform may be the only viable avenue for future business growth.

Slow Morphing

Suning’s transformation began with the launch of its e-commerce in 2009. A year later, the company stopped calling itself an “appliance retailer,” and last February 20 it unveiled a new name: Suning Commerce Group Co. Ltd.

The company in June introduced a fresh business strategy and dubbed it “online to offline,” or O2O, promising shoppers “equivalent pricing at retail outlets and through the online store that beats (competitor) prices found anywhere on the Internet.”

Zhang said the company would use the O2O model to integrate store and online systems for sales, supply chain, procurement and inventory management.

Then in August, the company sharpened its new direction by, for the first time, describing itself as an “Internet retail business.” At the same time, Suning’s IT team was putting the finishing touches on a new, online retail platform.

Sun acknowledged that linking the company’s 1,572 stores to an Internet platform has proven to be a more formidable task than building an online retail platform from scratch. For example, stores that traditionally focused on pure sales must now sell products as well as offer services and give consumers a “purchasing experience” through, for example, special product displays online and in store.

Suning’s internal reorganization is also turning heads. Since early this year, executives have replaced the old “region-subsidiary-operations department” structure with two management tiers, one at the regional level and the other for urban areas. The number of regional centers grew to 60 from 44, while urban centers doubled to more than 200.

A major question hanging over Suning’s transformation is whether the company’s more than 100,000 store employees can play a role in the push for Internet business. Employees have been given responsibility, for example, to get more shoppers to register on the website Once a consumer is registered, his or her computer IP address can be used for data analysis to determine, for example, individual store sales and consumer buying behavior in that part of the country.

Executives also envision morphing shop floor staffers into an army of online soldiers who electronically interact with consumers via microblogs such as Sina Weibo and social networks such as Weixin. The goal would be to build brand awareness and boost sales.

“In traditional, on-the-ground marketing, you hand out direct marketing advertisements, make on-the-spot demonstrations or push services,” said Sun. “Now, we’re emphasizing regional peer-to-peer marketing. We want to get to real people. We’re no longer interested in how many flyers we hand out.”

Tangible results from Suning’s experiment with store staffers have been limited so far, Sun said, because employees are not “actively reaching out enough.”

Suning is also planning to build through its website an “all-product category” that gives consumers access to more than 10 million products. It’s expected that even unique shopper demands will be accommodated through a combination of Suning retail products and goods from other vendors, which analysts said would provide about 70 percent of what’s sold through the site.

Air conditioners and washing machines can be found both online and in Suning stores. But advertisements of backpacks and cosmetics are also flashing on the homepage of Suning’s online platform, which are not sold in its stores.

Sun said Suning’s platform is aimed at pleasing vendors and consumers alike, not unlike Amazon. Vendors would get quality service and a good transaction environment that lets them focus on selling.

Only qualified vendors would be allowed to operate on the platform, with initial access given to authorized sellers of famous-name products and major retailers. One industry insider told Caixin that Suning’s business model depends on proper product categorization.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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