Suning powers up profit-building plan
Suning Commerce Group Co, a major electronics retailer that is turning to online sales, has vowed to lift profits by focusing on consumer-centric supply chains; a more open online platform through collaborating with third parties; and a fast and responsive delivery system by building one of the country’s largest logistic networks.
In a conversation on Thursday with more than 200 investors at company headquarters at Nanjing, Jiangsu province, Suning Chairman Zhang Jindong compared the company’s transition from traditional retailer to e-commerce company to the process of constructing the outside and then finishing the interior of a house.
“It is clear that people can see something built from scratch, but it is hard to see how the building is renovated,” Zhang said, speaking about the challenges the retailer faced after changing its name last year to showcase its emergence as an e-commerce player and its strategy of offering products at same price online and offline.
In2013, Suning reported revenue increased 7.05 percent to 105.2 billion yuan ($16.9 billion), but that profits and net profits plummeted 95.5 percent and 86.1 percent, respectively.
Ben Cavender, a senior analyst for ChinaMarket Research Group, said Suning was late to arrive to the fast-developing e-commerce transition in China.
Moreover, Suning has lacked clear brand identification with consumers, he said.
Zhang laid out plans to get the vehicle back on track this year, including building a supply chain that is oriented toward consumer needs and working with suppliers to develop products with better marketing focus.
Their brick-and-mortar stores will serve as a channel to strengthen their electronic appliances businesses, especially in communication products and intelligent housewares, he said.
A more open online platform through collaboration with third-party suppliers will improve Suning’s online value and resources, he said.
Zhang mentioned the possibility of utilizing the country’s widely used instant messaging toolWeChat, a service provided by Tencent Holdings Ltd.
The company also aims to build a logistics center with warehouse areas reaching 2.07 million square meters by the end of this year, in hopes of delivering items within half a day in Beijing, Shanghai, Guangzhou and Shenzhen, and second-day delivery in 12 other first-tier cities.
Cavender said the key to Suning’s performance this year will be its ability to execute those plans. “They could do very well, but they could also do poorly, and then it will be very difficult to take back market share.”
Jason Yu, general manager at Kantar Worldpanel China, said it is worth discussing whether Suning really needs so many physical stores or such large stores when it is trying to become an e-commerce company.
The company’s strategy could vary by region, Yu said.
For example, it could institute more online innovation for top-tier cities and stay focused on traditional stores in third- and fourth-tier cities, Yu said.
Last year, Suning opened more stores in second- and third-tier markets with 97 new stores. By the end of 2013, it had 1,585 stores on the Chinese mainland, 29 stores in Hong Kong and 12 in Japan.