Feb. 12 (NBD) -- Chinese e-commerce titan Alibaba Group will purchase a 15 percent stake in the leading furniture retailer Beijing Easyhome Investment Holdings Group Co., Ltd (Easyhome) for 5.453 billion yuan (865.5 million U.S. dollars), becoming the second largest shareholder of the company.
Other investors including Yunfeng Capital, Sequoia Capital, China Equity Group, JD Capital and Boyu Capital also invested around a total of 7.547 billion yuan (1.2 billion U.S. dollars) in the Chinese home furnishing chain.
The new deal signals alibaba's foray into the home improvement field and the new investment will also enhance the competitiveness of Easyhome, which expanded rapidly with climbing debt in the past 3 years.
According to the agreement, Alibaba Group will support the digital transformation of Easyhome's stores and provide consumers with the reconstructed scenario and upgraded experience of selecting building materials and buying furniture through the interconnection of member systems of both sides and digitalization of products. Besides, Alibaba and Easyhome will jointly establish online home decorating platform and reform business mode of the entire industrial chain in the home improvement industry.
Alibaba's new investment accords with its retail strategy which aims to cover retail related sub-industries, not simply the traditional industry such as traditional retailing and clothing, Wang Wenhua, executive director of China Insights Consultancy (CIC), told NBD.
Moreover, the penetration rate of the internet in the home furnishing industry is lower than the other sub-industries, so this sector still has great potential. The collaboration between the two parties shows their ambition to capture the home market and the ungrading consumption sector.
Since Jack Ma, chairman of Alibaba Group, put forward his "five new" strategy including new retail at the end of 2016, the group has made remarkable achivemnets in unmanned retail, smart stores, pop-up stores and other sectors, based on its new retail foundation Taobao as well as Tmall, and the new business infrastructures including Ant Financial, Cainiao Network and Aliyun.
Dugu Yifeng, analyst of internet industry, commented that in the future, the new investment of alibaba will offer Easyhome the internet operation experience, big data of consumption in the home furnishing industry and the cut-edged internet intelligence technology, which will help the home improvement company build a closed loop of the new quality home service leveraging the offline and online activities.
It is noted that apart from Alibaba, Tencent has also entered the retail industry by investing in JD.com, Yonghui, Miss Fresh, Wanda, Heilan Home and other retail firms.
Founded in 1999, Beijing-based Easyhome is China's second largest home improvement supplies and furniture chain operator. It also provides home design and refurbishment service as well as operating building material supermarkets.
With the core business of home furnishing, Easyhome expects to open 600 stores within 5 years and to make the number of stores doubled in the next 10 years, Wang Linpeng, chairman of the company revealed the future plan on the press conference held on Sunday.
As of the end of 2017, Easyhome has 233 stores across China, with the sales exceeding 60 billion yuan (9.5 billion U.S. dollars), and the volume is expected to reach 200 billion yuan (31.7 billion U.S. dollars) by 2027.
NBD noticed that the company is facing the pressure from its major rival Red Star Macalline which has the advantage in store number over Easyhome and is strategically expanding its store network in cities to improve the market share.
Wang also admitted that Easyhome has spent a large amount of money during its expansion.
According to the report, the loan of the company has increased by 4.38 billion yuan (695.2 million U.S. dollars) in 2017, accounting for 43.18 percent of the net assets by the end of 2016.