Suning was rumored to be in talks with OKBuy, the Chinese Zappos wannabe, about a potential buyout, according to local portal Sohu. The report noted that actually Suning was approached by OKBuy as the latter is facing a shortage of capital and is looking to sell the company, but deal was compromised over the two parties’ disagreements on valuation and acquisition cost.
Implications? First of all, vertical B2Cs seemed to be doomed in China after a string of ‘defeats’ ranging from Letao, Masa Maso, VCotton (shut down already) to RedBaby. Suning acquired RedBaby this September with US$ 66 million, blowing off RedBaby’s dreaming IPO. RedBaby, the maternity-child vertical raised more than US$ 120 million in several rounds, which means its investors’ patience wore thin and would rather sold the asset at 50% discounts.
Letao, the other Zappos wannabe, shifted its focus away from selling 3rd party brand shoes (the likes of Nike, Adidas and so forth) to promoting own-branded shoes, which according to the company are more profitable with higher margins, supposedly.
Honestly, OKbuy running out of cash is sorta a surprise to me as the company just got Tencent’s support last year. Tencent poured about US$ 50 million into the company and integrated the service into its B2C storefront buy.qq.com, meaning big money at hand and huge traffic to be expected for OKBuy. However, OKBuy screwed it up to the extent of a sell.
The company reportedly was beefing up its own courier service after raising big bucks; probably one of the many reasons weighed it down. Letao, on the other hand, employed 3rd party couriers to do the dirty work. In an interview with Letao last year, the company’s VP particularly mentioned this point to differentiate itself from OKBuy.
Secondly, Suning is really at it with all the investments and buys to booster its online business. In addition to the RedBaby deal and the rumored OKbuy deal, we also heard that the company sit together with Masa Maso for a potential purchase.
In the just past Double-Eleven online spending carnival, Taobao/Tmall’s astonishing US$ 3 billion transaction overshadowed its peers, including JingDong Mall, the one that has been placed much expectations on to rival TMall. JingDong hit about US$ 400 million during the same period. Suning didn’t give out any explicit number except for disclosing 1.5 million orders.
Acquiring established vertical B2Cs, of course could help Suning ramp up transactions in a very short period, but problems accompanied acquisition like consolidation, resources allocating and so on could also be a big burden, Tencent is a great example on this.