Alibaba invests $3.9b in China's top grocer

Lucy Bush
November 21, 2017

Daniel Zhang the CEO at Alibaba said physical stores represent an indispensable role in the consumer journey, and must be enhanced through technology that is data-driven, and personalized services in today's digital economy.

XAutoplay: On | OffSun Art Retail operates 446 "hypermarket complexes" in 224 cities across 29 provinces, regions and municipalities in China, under the RT-Mart and Auchan banners.

It is the latest in a string of strategic moves by Alibaba as the e-commerce company continues to roll out its "new retail" vision, both within China and overseas.

Hong Kong-Alibaba Group Holding Ltd.'s $3.7-billion deal to buy a slice of China's largest hypermart chain pits it against Wal-Mart Stores Inc.in the world's largest retail arena.

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The investment gives Alibaba a strategic foothold in markets of two major Chinese retailers -Auchan Retail and Ruentex Group. Like in America, the Chinese supermarket space is ultra competitive and plagued by low margins - not to mention the constant threat of e-commerce taking more and more market share away. Further, the executive said that Chinese consumers will experience a fully integrated, world-class shopping experience as offline and online giants come together. Jack Ma's company spent billions buying into grocers, shopping malls and even department stores long before Amazon picked up Whole Foods.

Under the deal, Alibaba Group, will form a strategic alliance with Auchan Retail and Ruentex Group, the e-commerce giant said in a separate statement.

Walmart, the world's largest retailer, is focused on turning around a sluggish Chinese operation through a partnership with JD.com, marrying online commerce with data and combining their network of warehouses and cold storage for same-day delivery to customers.

It's early days in Alibaba's grand experiment, but if it works, it could deepen a lead over Bezos' Amazon in the fragmented world of physical retail.

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That caused Sun Art's shares to drop in Monday trade, with the stock down around 4% at HK$8.27 late in the trading day.

Shares of Hong Kong-listed Sun Art, which were suspended on November 13, resumed on Monday and were down 5.3 percent in morning trade, while the benchmark index .HSI was flat.

"The acquisition by Alibaba is part of its investment diversification", said Andy Kwan, a Hong Kong-based director at ACE Centre for Business and Economic Research.

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