Alibaba has already made a strong place for itself in the e-commerce industry, and it is now aiming to deepen its integration with brick-and-mortar stores. The Chinese e-commerce giant is leading an effort to take department store chain Intime Retail Group Co. private for as much as $2.6 billion, according to Bloomberg.
Alibaba aims to make it big offline as well
Alibaba took its initial stake in Intime in 2014 with an investment of $692.25 million. To acquire the Intime shares they do not already own, Alibaba and Intime’s founder Shen Guojun will pay HK$10 per share. Overall, it will cost them as much as HK$19.8 billion ($2.55 billion), including stock options. This represents a premium of 42% over Intime’s previous closing price.
The online business is slowing down, and this had led Alibaba to pursue growth beyond that, adding to its burgeoning foothold in physical retail, notes Bloomberg. Gaining control over Intime will allow Alibaba to explore ways to modernize a $4.5 trillion industry that has failed to adapt well to the growing popularity of online shopping.
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In a statement, Alibaba CEO Daniel Zhang said the company does not divide the world into real or virtual economies, but into the old and the new, and those sticking to the old ways of retail will be disrupted.
“Our combination with Intime will enable us to tap into the long-term growth potential of a new form of retail in China powered by Internet technology and data,” Zhang said.
Brick-and-mortar stores still hold value
According to Alibaba, China’s retail sector is quite huge at $4.5 trillion and is growing at 10.7% per annum. By working with offline retailers, the e-commerce giant intends to create a new shopping experience.
Alibaba’s founder, billionaire Jack Ma, aims to upend a splintered and bloated Chinese retail landscape by reducing costs and improving efficiency as it eliminates middlemen. The Chinese company has already partnered with electronics chains Suning and Haier to expand its online offerings, sales and delivery network, notes Bloomberg.
Bloomberg Intelligence analyst Catherine Lim says, “This deal shows that there is still value to brick-and-mortar stores, enough to interest e-commerce players. What it’s shown is that department store chains are still relevant and of value. We could be seeing renewal of a sunset industry.”
A surge of 35% was seen in the Hong Kong-listed company’s stock after it resumed trade following a two-week suspension on Tuesday.