Alibaba is investing $364 million in Haier Electronics Group Co., Ltd. (HKG:1169) (OTCMKTS:HRELF), an electronics manufacturer that is already building smartphones using Alibaba’s Aliyun OS, reports Jon Russell at The Next Web. According to Haier, the deal will “fully leverage Haier Group’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.”
Alibaba king of Chinese online retail market
Alibaba already controls a huge section of the Chinese online retail market, raking in an unprecedented $5.75 billion in online sales on November 11th, the equivalent of America’s Cyber Monday, beating last year’s $3.1 billion record in just 13 hours. This latest investment, which is divided $124.5 million in Haier Electronics Group Co., Ltd. (HKG:1169) (OTCMKTS:HRELF) and $240 million in the subsidiary Goodaymart, is meant to start strengthening the supply chain and logistics business that is still being built up.
The 11/11 sales demonstrates why it’s so important for Alibaba to get into the Chinese logistics business. While other companies might want to get involved at every point in their entire supply chain in order to maximize profits, Alibaba had trouble filling all of its orders promptly because Chinese logistic firms don’t have the sophisticated software or warehouse equipment necessary to deal with such a rapid influx of orders. Instead of waiting for the lack of modern logistics to limit its retail business, Alibaba intends to develop that sector itself.
Alibaba’s move into logistics all about pragmatism
Alibaba has plans to go public sometime in the next year, but its attempt to get listed on the Hong Kong stock exchange was rebuffed because the company’s partners, including Chinese entrepreneur Jack Ma, wanted to retain control over board nominations even though they only control 10% of the company. This violates Hong Kong exchange rules about treating all shareholders equally (dual-class voting systems are prohibited), so the company has started preparing to list in the US where companies are allowed to have more complex partnership structures. It had originally planned to go public either at the end of this year or early 2014, and while a 2013 IPO seems unrealistic Alibaba is still expected to be listed in the US as soon as it can.