Alibaba Buys Brick-And-Mortar Retailer As It Eyes Competition From Walmart

The biggest online retail operator in China, Alibaba, has agreed to purchase a 36% stake in offline retail giant Sun Art Retail Group at a price of $2.9 billion. This will now pit Alibaba against Walmart in the largest retail market in the world. Sun Art Retail Group has around 400 hypermarkets operating under the RT-Mart or Auchan banners.

The deal will also see the French-based Auchan Retail SA raise its stake in Sun Art Retail Group to around 36% and create an alliance with Alibaba targeting the same segment Walmart is eyeing – Chinese food. It is understood that Alibaba’s strategy is to use Sun Art Retail Group to deepen its foray into the offline retail arena in China which is estimated to be worth approximately $4 trillion.

Partnership with JD.com

Walmart has also partnered with the second-biggest online retailer in China JD.com in a bid to extend its reach beyond the cities. The largest retailer in the world is also expanding its stores falling under the Sam’s Club brand there as it targets Chinese consumers who are looking for imported and premium products.

“Alibaba and Sun Art are forming a strong alliance: China’s dominant e-commerce giant and its best hypermarket operator. They can leverage the alliance and bring more benefits than Walmart and JD,” Veronica Wang, OC&C Strategy Consultants’ associate partner, said.

The move by Alibaba is the latest evidence that the Chinese e-commerce giant is outspending Amazon in the quest to overhaul brick-and-mortar retail. The acquisition of a stake in Sun Art is just the latest among many investments that Alibaba has made in physical retail in the recent past.

Whole Foods Market

Amazon’s first attempt at this was with the acquisition of Whole Foods Market at a price of $13.7 billion after many years of Alibaba spending billions acquiring shopping malls, department stores and grocers. In its latest acquisition Alibaba has managed to get Sun Art at a discount of 24% following uncertain prospects that were clouding the retail operator as well revenue deceleration that has been going on for years.

In its physical retail foray, Alibaba intends to transform traditional shopping by introducing advanced technology into stores in order to manage customer and inventory data better. It is the same thing that JD.com and Walmart are doing after their partnership was deepened further last year. In a 2016 regulatory filing Walmart disclosed that its stake in JD.com had risen to more than 10%.

No Comments

    Leave a reply