The internet giant has announced an investment plan worth about $2.87 billion in order to acquire a major stake in China’s hypermarket front runner, Sun Art Retail Group Ltd as part of a much wider plan to push into offline retail.
The move will come as part of a bigger plan involving three companies, Alibaba buying the stake from Ruentex Group and Auchan Retail boosting its stake- the three companies revealing in a recent press statement.
The coalition is set to target the vast opportunities in China’s $500 bln food retail space, with Alibaba looking to consolidate its big data infrastructure in the offline retail space where according to recent stats, 85% of sales are made.
Alibaba’s Chief Executive Officer Danien Zhang, while making a statement 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,”
Sun Art Group’s shares resumed on Monday having lost 5.3% in the morning trade, while its benchmark .HSI was flat.
The deal, when completed, would give the French Retail group Auchan SA, Alibaba and Taiwan’s Ruentex 36.18%, 36.16% and 4.67% respectively in the retail company.
Having invested more than $9bn in brick and mortar stores since 2015, it has tested the waters, opening many unstaffed “concept” shops in the past year.
The $474 billion firm is making riskier moves to consolidate its offline, rural and overseas buyer base as China’s online urban e-commerce market shows steady signs of plateauing. This has included making large infrastructure purchases which it hitherto avoided.
Some experts feel Alibaba is biting off more than it can possible chew, going into uncharted territory with its recent moves while others just see this as a process with a steep learning curve, one that they’re sure the company will surmount.