We just heard spreading rumors claiming that Suning is looking to acquire RedBaby and Masa Maso, two vertical B2C services with focus on maternity-children items and men’s apparel respectively.

Chinese B2C service Suning ranked No.3 among its peers by market share, according to a latest report, though its share of 2.35% trailing behind Tmall’s 37.38% and 360buy’s 17.23%. It seems that the site is trying to buy into other territories. The potential acquisitions come at a good time – well, not so much for the targets though – when both RedBaby and Masa Maso are confronting with their growing pains.

 

Redbaby in Crisis

Back in 2011, the maternity-children B2C site once claimed an IPO, but now signs showed that what it really needs is an acquiring firm. CEO Xu Peixin recently said that last year Redbaby had successfully raised $20 million and a new round of $20 million is coming by the end of this month. The investors were some old friends, Northern Light Venture Capital, NEA and KeyToneVentures. It is speculated that these VCs had no choice but kept on putting in because they’ve been on the hook of Redbaby’s huge losses.

“If the price is reasonable, Suning might take it over. But the deal could be much tougher than it seems, for previously the three VCs had invested more than $100 million in Redbaby and the marketing costs of the site are not low at all”, said a former executive of RedBaby.

Competition is always fierce and cruel, especially in Chinese B2C sector. Redbaby, lost its edge in maternity-children products in 2010 when some big guys started entering this area. This May, 360buy’s maternity-children channel announced the sales of March surpassing RMB 100 million. Last month, Dangdang also released data that shows maternity-children business had grown to become the second largest one on its premise. Facing the strong forces of the titans, Redbaby did not come out with any feasible solutions. Moreover, the management team is setting apart and three of the founders had left.

 

Masa Maso: out of Cash

Masa Maso which is a designer menswear e-tailer, on the other hand, was also rumored to be the target firm of Suning. This March, the company closed its showroom in Beijing, which used to be a highlight in its brand marketing strategy. Meanwhile, its advertising budget dropped by 50% and the staff salary also fell by 20-30%.

Masa Maso has finished two rounds of fund raising, one is around tens of millions dollars. However, the company hasn’t revealed any news of the long-awaited series C funding since last October. If the deal with Suning goes well, it will make a win-win situation: Masa Maso can solve the urgent problem of cash lacking, and Suning can set up a clothing channel with low input.

Suning just announced issuing RMB 5.5 billion additional shares, and some speculated that the money would be used for further expansion. VP of the Suning Group, Sun Weimin also claimed that, “Now the capital market is cooling down, which could be a good chance for Suning’s acquiring and investing moves.”

The earnings report of Suning showed it’s total revenue in 2011 was RMB 5.9 million, and this year the target is RMB 30 million, which is 6 times last year’s number. A quick expanding requires large inventory, acquiring is supposed to be a solution.

Chinese etailers are still rolling in the deep though it seems that none of them had the intention to quit the battle. Yesterday on Weibo, CEO of 360buy wrote that from Q3 the company would lead another round of price war, which should the biggest and fieriest ever. Very soon, VP of Suning Li Bin followed up claiming that Suning would definitely join the war. They are competing price, scale and service, but how about… the profits?