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Alibaba invests $3.7 billion in Chinese chain to help fight Wal-Mart

21 November, 2017, 01:01 | Author: Priscilla Morrison
  • Alibaba Goes Offline With $2.9 Billion Stake in China's Top Grocer

Sun Art operates about 450 hypermarkets under the Auchan and RT-Mart banners across 224 cities in mainland China.

Ruentex will own a 4.67% stake in Sun Art Retail following the transactions, while Auchan Retail, which is also increasing its stake in Sun Art Retail, will hold a 36.18% stake and continue to consolidate the Chinese company into its financials.

Sun Art is a grocery store leader in China, with its brands taking about 15 percent share in the hypermarket business in the country, followed by Walmart stores with 10 percent, Bloomberg reports, citing Euromonitor data.

With the deal, Alibaba is looking to become a major player in China's $500 billion food retail sector.

The deal would give French retailer Groupe Auchan SA, China's Alibaba Group and Taiwanese conglomerate Ruentex 36.18 percent, 36.16 percent and 4.67 percent stakes respectively in Sun Art. Alibaba would replace Ruentex as the second-largest shareholder.

Steven Kwok, an associate partner at OC&C Strategy Consultants, said Alibaba would get an enhanced distribution network through Sun Art's stores, while Sun Art will benefit from Alibaba's expertise in e-commerce.

Alibaba noted in a press release that this alliance is part of its New Retail push. Alibaba is buying the shares from existing shareholder Ruentex Group.

Wilhelm Hubner, chief executive of Auchan Retail, said the alliance will allow them to serve a "fully integrated" in-store and online shopping experience to hundreds of millions of Chinese consumers.

Alibaba continued its growth into offline retail after the e-commerce giant based in China bought over a third of one of the most prolific Chinese operators of hypermarket stores.

But, while Amazon has been tight lipped about the extent to which it's Amazon Go shopping centers will integrate into the Amazon e-commerce ecosystem, and what role they play in the context of Whole Foods, Alibaba is promoting its Hema outlets as fulfillment centers for online orders. It has introduced a lot of concept shops in the past year, including grocery and coffee stores. According to research firm IGD, the market is expected to be reach $180 billion by 2020.

"They're getting into a territory that's not their core strength. for example securing a property, the licenses to sell certain products, paying tax, more labor and so on", said Weiwen Han, managing partner for Greater China at Bain & Company.



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