Caixin
Jan 03, 2017 05:33 PM
BUSINESS & TECH

Suning Buys 70% of Courier Tian Tian Express

(Beijing) — Electronics retailer Suning Commerce Group Co. Ltd. has bought 70% of private courier Tian Tian Express, aiming to ramp up its last-kilometer and small-item delivery capacities to better compete with e-commerce giants like JD.com.

The leading seller of home appliances and electronics paid 2.97 billion yuan ($427.6 million) for its stake in Tian Tian, whose service uses the name TTK Express. Suning said it will buy the remaining 30% for 1.275 billion yuan within the next 12 months, according to a stock filing on Tuesday.

Suning said the purchase will enhance its last-kilometer delivery services, which are struggling to keep up with growing online orders from its e-commerce business. Suning Commerce Group Co. Ltd. has built up a national network of warehouses and delivery services for its core home-appliance business, but lacks similar capabilities for delivering smaller parcels, which are often purchased online.

“We will incorporate Tian Tian’s warehouses and delivery branches in a short amount of time, boosting our flexibility and efficiency,” Suning said in a statement.

Analysts say the purchase will give the brick-and-mortar appliance retailer more of an edge as it tries to compete in e-commerce with companies like JD.com, which has more-efficient delivery services.

“Suning still heavily relies on its trucks from the offline era to deliver refrigerators and electric heaters to consumers,” said Yao Jiangfang of the China E-commerce Association. “But as Suning begins to expand into a full-fledged e-commerce site, with smaller items like apparel, books and food, it needs to invest more into small-parcel delivery services.”

Tian Tian is a relatively new but promising player in China’s flourishing private delivery service sector, with revenues growing at nearly 60% in the past two years. By comparison, the largest players like publicly traded Yunda Express and ZTO are edging forward with 30% revenue growth.

Despite its great potential, Tian Tian is still a minor presence, handling less than 4% of the packages in China. Yao said selling itself is the best strategy for smaller players like Tian Tian, which might not attract much investor interest with public listings. “Smaller brands are being gobbled up by larger delivery firms in the industry reshuffle. Tian Tian needs a strong patron to count on,” said Yao.

Suning has joined e-commerce behemoth Alibaba in an alliance against their rival JD.com by setting up a joint venture in October. That came after Alibaba spent 28.3 billion yuan in 2015 to buy 20% of Suning’s shares.

Contact reporter April Ma (fangjingma@caixin.com)

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