PALO ALTO -- China's largest retailer, Suning Commerce Group, opened a new research and development lab here Tuesday, a move that positions the company's leaders to tap Silicon Valley technology and talent to grow the country's global retail prowess.
Suning's new facility will become the company's high-tech hub for developing e-commerce services such as improved online searching and collecting data on shoppers' habits. It also marks the company's entry into California and the start of what Suning hopes will be a rapid U.S. expansion. The online retail site doesn't sell to U.S. consumers and is not open to U.S. retailers, but Suning Vice Chairman Weimin Sun said that will "certainly" change in four to five years.
Suning, which started in 1990 as a single store that sold air conditioners, has grown to 1,600 stores and 180,000 employees in 600 cities throughout China, Hong Kong and Japan. Since launching Suning.com in 2009, it has become one of China's top e-commerce sites. The company has expanded its offerings to be less focused on electronics and its website sells everything from Huggies diapers to socks and beauty products.
Suning plans to hire 200 engineers and developers for the Palo Alto lab by 2017 -- it now employs 15 people -- and Sun was candid about the company's intent to acquire as many startups as possible to support the lab in big data technology, cloud computing, marketing and online banking. He declined to say whether they were already eyeing certain startups.
The Suning Commerce R&D Center USA is the company's third such facility -- the other two are in Beijing and Shanghai -- and Sun said it is "the most significant."
"Here is where the action is," he said, speaking through an interpreter. "We're going to see innovation and disruptive innovation in this neck of the woods."
Suning's arrival was cheered by tech leaders, academics and California public officials, many of whom attended Tuesday's event in Burlingame to celebrate the grand opening. Elected officials including Gov. Jerry Brown, San Francisco Mayor Edwin Lee and Oakland Mayor Jean Quan, have made frequent visits to China to encourage cross-trade and attract more Chinese investors to the Bay Area.
Earlier this year, the Brown administration opened a California foreign trade office in Shanghai, operated by the Bay Area Council, a San Francisco-headquartered business organization. Trade between California and China topped $150 billion in 2012, and Bay Area Council CEO Jim Wunderman said Tuesday his group is working to attract more companies like Suning to the region.
California has rolled out a number of tax breaks to encourage tech companies to put down roots here. Brian Peck, the state's deputy director for international affairs and business development, said Tuesday that Suning can take advantage of a sales and use tax exemption and hiring credits.
The company is working to keep pace with China's booming e-commerce market, which has grown sixfold since 2010. The Nov. 11 "Single's Day," an online shopping holiday in China, shattered previous records with consumers spending a total $5.7 billion this year, an 83 percent increase over 2012, according to Alibaba Group. About 500 million Chinese regularly buy from websites.
"Online shopping has become a daily part of life," Sun said.
Suning officials said they also plan to use the lab to develop wearable tech devices such as smart bracelets, posing a challenge to Silicon Valley locals such as Apple (AAPL) and PayPal, both at work on wearable devices. And Palo Alto is just the first stop for Suning, which is also exploring plans to build research-and-development facilities in New York and Seattle.
Suning sales were $37.7 billion in 2012, slightly more than half of Amazon.com's revenue that year. Suning says it is on pace to exceed $100 billion from online and store purchases by 2020.
Contact Heather Somerville at 510-208-6413. Follow her at Twitter.com/heathersomervil.
Headquarters: Nanjing, Jiangsu, China
Palo Alto facility: 1661 Page Mill Road
Chairman: Zhang Jindong
Revenue: $37.7 billion
Development and research sites: Beijing, Shanghai, Palo Alto
Palo Alto hires: Currently has 15 employees with plan for 50 by 2014 and 200 by 2017