Alibaba gobbles up stake in China's Walmart

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

Daniel Zhang, chief executive of Alibaba, said: "Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalised services in the 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.

In what can be seen as its latest strategic move, Alibaba puts into practice its new approach to retail marketing.

The investment gives Alibaba a strategic foothold in markets of two major Chinese retailers -Auchan Retail and Ruentex Group.

As part of an alliance with Auchan Retail S.A. [AUCH.UL] and Ruentex Group, Alibaba would buy the stake from Ruentex while Auchan Retail would boost its stake, the three companies said in a joint statement.




That being said, the attempt to merge online and offline features of retail by giants like Alibaba and Amazon holds promise as it unites the confidence of shopping offline with the convenience of shopping online. 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. The e-commerce giant has Hema groceries brand, which offers combined experience of online and offline shopping. Notably, offline retail now constitutes 85% of total retail sales in China despite the enormous growth of e-commerce over the last few years. The firm also owns a 20% stake in electronics retailer Suning Commerce Group, for which it paid $4.6 billion in 2015.

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.

Shares of Sun Art Retail Group, which were postponed on November 13, restarted on Monday and were declined 5.3 percent in morning trade, while the benchmark index was flat.

Sun Art Retail Group Ltd. was going through a lean patch, its sales went down as Chinese shoppers prefer to go online to buy high-end products. The plunge took place following the announcement of the Alibaba deal.

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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