Alibaba Group Holding Ltd is teaming up with Auchan Retail and Ruentex Group for an alliance that pools the companies’ online and offline expertise as a strategic tactic to explore new retail opportunities in China’s $500 food retail sector. As part of this push into brick-and-mortar retail, Alibaba Group announced it would invest $2.87 billion for a major stake in China’s hypermart operator Sun Art Retail Ltd.
“Alibaba is excited to join with our new partners to redefine traditional retail through digital transformation,” said Daniel Zhang, Chief Executive Officer of Alibaba Group, in a company press release. “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. By fully integrating online and physical channels together with our partners, we look forward to delivering an original and delightful shopping experience to Chinese consumers.”
The latest acquisition in a series that has also seen Suning Commerce and Intime Retail Group join under the e-commerce company’s umbrella, Alibaba will acquire 36% of Sun Art, a number that Auchan Retail plans to match. This move is part of the company’s plan to secure offline, rural, and overseas buyers and expand existing networks as China’s urban e-commerce market begins to saturate and grows beyond its current 1.3 billion consumers.
“Alibaba and Sun Art are forming a strong alliance: China’s dominant e-commerce giant and its best hypermarket operator,” noted Veronica Wang, an Associate Partner with OC&C Strategy Consultants, according to a Bloomberg report. “They can leverage the alliance and bring more benefits than Walmart and JD.”
According to Reuter’s, 85% of China’s sales are made in the offline retail market, and as a way to respond to this demand, Alibaba has invested over $9.3 billion in brick-and-mortar stores since 2015. Setting its sights on Sun Art is a means for Alibaba to tap into the success of this market. Despite Walmart operating 450 hypermarkets in China, Sun Art leads the Chinese grocery store market by 8.2% and operates 400 hypermarkets.
Could this retail expansion experiment provide Alibaba a leg up over global competitors like Walmart and Amazon? Deli Market News will continue to bring you the latest in grocery industry news.