Alibaba Ups the Ante in New Retail With Fresh Investments

Alibaba buys 36.2 per cent stake in Wal-Mart style hypermarket chain for US$2.9 billion

"Physical stores serve an indispensable role during the consumer journey, and should be enhanced by data-driven technology and personalized services in the digital economy", Daniel Zhang, chief executive of Alibaba Group, said in a joint statement by the three companies.

SURRY has 450 hypermarkets across China, operating under its RT-Mart and Auchan brands.

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.

In August, Amazon bought United States upmarket grocery chain Whole Foods Market for US$13.7 billion, the biggest acquisition in the e-commerce giant's history, in an aggressive push further into physical stores and merge online and offline retail. As part of the deal, France's Auchan Retail SA will raise its stake in the Hong Kong-listed company to a similar level, and form an alliance with the internet giant to tackle the same Chinese food retail sector Wal-Mart is targeting. 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.

In 2014, Alibaba bought 35 percent stake in Chinese department store operator InTime, and in the following year took 20 percent in electronics and electrical appliance retailer Suning. Further, the executive said that Chinese consumers will experience a fully integrated, world-class shopping experience as offline and online giants come together.

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Either way, developments such as these are rendering the term "e-commerce" increasingly nebulous, also suggesting that there are limits to consumer's appetites for in-home deliveries, or their willingness to give up perusing the aisles for something that strikes their fancy.

In a separate statement, Sun Art said Alibaba's Taobao China Holding Ltd would make a general offer for the company at HK$6.50 apiece.

But decelerating growth and narrowing margins may be why Alibaba's getting into Sun Art for about $6.50 (Hong Kong dollars, about $1.06 Canadian) a share versus $8.60 ($1.41 Canadian) before shares were suspended November 13. The latest deal will provide Sun Art with an access to Alibaba's digital ecosystem.

Steven Kwok, associate partner at OC&C Strategy Consultants, feels that grocery retailing is emerging as a challenge for online retailers due to sluggish single-digit market shares.

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