Alibaba Group, China’s leading e-commerce company, announced last week plans to invest $364 million in Chinese appliance maker Haier Group in a deal that includes building a logistics network for delivering appliances and furniture throughout China.
As part of the deal, Alibaba will acquire 2% of Haier’s Hong Kong-listed subsidiary Haier Electronics and a 34% stake in Haier’s , Goodaymart logistic network. Goodaymart operates 90 fulfillment centers with more than 2 million square meters in warehouse space. It provides some services not typically provided by logistics companies, such as installing air conditioners and appliances. Haier’s service and distribution networks cover more than 2,800 cities and villages in China and the company operates more than 17,000 service stations.
Alibaba Group ranks No. 1 in the Internet Retailer Asia 500 guide. Haier Group is No. 59. Haier sold $152 million products through its online marketplace and its Ehaier.com e-commerce site in 2012, according to the guide.
Haier and Alibaba will “invest resources and fully leverage Haier’s operational experience and Alibaba’s e-commerce, data and information capabilities to create a fast and convenient end-to-end e-commerce and logistics experience for consumers,” the companies said in a press release announcing the deal.
“Haier has much to learn from Alibaba Group through this collaborative effort, and this partnership is not aimed at simply growing the business but also enhancing the user experience,” says Zhang Ruimin, chairman and CEO of Haier Group. “The Internet has given traditional business models an opportunity to transform for the better, and we are optimistic and confident that this collaboration will create concrete benefits for all.”
“The new economy is not the digital economy, but rather one that combines the real economy and digital economy, a true blending of virtual and real,” Jack Ma, executive chairman of Alibaba Group, says.
More Chinese consumers are buying large items online. In China’s recent Singles Day online sales event Nov. 11, the sales of household appliances on Tmall.com grew more than 350 percent compared with a year ago, according to Alibaba, which operates Tmall and Taboao, two dominant e-retail marketplaces in China. In addition, sales of furniture and other large-sized goods increased by 150%, Alibaba says.
Haier allows a consumer to customize products online before she orders, for example, to create a refrigerator that fits her kitchen exactly. What’s more, if many consumers select a particular configuration, the price for the product with that configuration goes down. Shoppers must put down a deposit and to wait for custom items to be produced, which normally takes several weeks, according to Haier.
In a recent sales event, more than 1 million consumers customized goods and Haier sold online more than 10,000 customized LCD-TVs in two days. Sales from pre-ordered, customized products account for 30% of the company’s online sales, it says.