Alibaba's $4.5 Billion Investment In Suning Is A Move To Challenge JD.com's Leadership In Consumer Electronics, Here's How

Alibaba Group Holding Ltd BABA reported on Monday that it will be acquiring a minority stake (about 20 percent) in brick and mortar retailer Suning for $4.5 billion. Suning operates several electronic stores across China.

Henry Guo, managing director and senior research analyst at Summit Research Partners, was on CNBC recently to weigh in on this deal.

Will Help Alibaba

"We are positive about this alliance," Guo began. "We really believe Suning's brand awareness in consumer electronics category and also its offline physical presence across China really should help Alibaba to meaningfully challenge JD.com's leadership in this category and also have enable Alibaba to leverage Suning's logistics and delivering expertise in the future."

Duplicating What JD.com Has Done

Guo was asked that with Alibaba making such a huge investment in physical retail, will it change how investors perceive the company. He replied, "Definitely. So, when people talk about O2O and [last minute] delivery, really JD.com has edge over Alibaba through JD.com recent investments and also its in-house solid control of customer service, Really, I think, that is Alibaba [where it's] coming from is that they tried to duplicate what JD.com has been done before and that's really the strategy here."

Strategy: Partnering With Local Service Providers

On concerns that whether Alibaba is paying too much for this deal when it's not even getting a controlling stake, Guo said, "Really, I think, the expertise for Alibaba is online. So, [...] when people talk about O2O you really connect consumer with the local merchants, local service providers. Really, I think, strategy here is really to partner with some local providers who provide service to consumers. So, that is the only major player in the space including Baidu and Tencent what they are trying to achieve here."