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Alibaba Invests $2.9B In China’s Top Grocer To Push Its Offline Presence

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Alibaba bought about one-third stake in the Chinese hypermarket store operator Sun Art for HK$22.4 billion (around US$2.88 billion) to expand its presence in offline retail. Sun Art Retail Group Ltd operates over 400 hypermarkets under the Auchan and RT-Mart banners.

To focus on data and personalized services

Alibaba, with 36.16% stake, becomes the second-largest shareholder in SunArt. Ruentex, the shareholder that sold their stake to Alibaba retains 4.67%, while the French retailer Auchan Retail with 36.18% is the biggest investor.

With the deal, Alibaba is looking to become a major player in China’s $500 billion food retail sector. In a statement on Monday, Alibaba Chief Executive Officer Daniel Zhang said, “Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalized services in the digital economy.”

Julia Pan, a Shanghai-based analyst at UOB Kayhian noted that SunArt has a strong supply chain, so investing in it is a smart decision rather than Alibaba doing everything from scratch, according to Bloomberg.

“The new-retail strategy seems to be the new trend for e-commerce giants.”

Wilhelm Hubner, Chief Executive Officer of Auchan Retail, said the deal with Alibaba reflects the common aspirations they have toward the future of commerce in China. Further, the executive said that Chinese consumers will experience a fully integrated, world-class shopping experience as offline and online giants come together.

Continues its offline retail push

Steven Kwok, associate partner at OC&C Strategy Consultants, feels that grocery retailing is emerging as a challenge for online retailers due to sluggish single-digit market shares. The expert notes that the trend is more obvious in China than anywhere else as customers also give importance to the “touch and feel” factor that offline stores bring, according to the South China Morning Post.

Alibaba, who has been quietly developing its offline capabilities, seems to have realized this years ago. The company already operates an offline store through Hema. These hybrid stores allow customers to buy items and make payments via unmanned payment checkouts, or order for delivery. Hema stores don’t just give a glimpse into the future of the retail, but also serves as the hub for Alibaba retail ideas for retailers like SunArt, InTime and Suning.

Apart from 20 Hema supermarkets in China, Alibaba also has a strategic partnership with China’s largest supermarket operator Bailian Group and a stake in Bailian Group’s largest chain Lianhua Supermarket, notes The Drum.

In addition, back in 2014, the Chinese retail giant upped its stake in the department store operator InTime to 35% followed by a 20% stake in the retail giant Suning for $4.6 billion in 2015. Earlier this year, Alibaba acquired InTime entirely and made the company private.

Alibaba’s deal could be seen as similar to Amazon’s acquisition of Whole Foods for $13.7 billion this year. The acquisition gave the U.S. firm a major presence in physical retail. However, unlike Amazon, the Chinese firm already has made major investments in the offline retail previously.

In pre-market trading today, Alibaba shares were up over 1%. Year to date, the stock is up almost 111%, while in the last one-month, it is up over 4%.

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