Alibaba Is Spending $2.9 Billion to Challenge Walmart in China
The online giant looks to be betting on an evolution of brick-and-mortar retail, acquiring 36% of Sun Art Retail Group (SURRY)–China’s largest operator of Walmart-style hypermarkets. Bloomberg reports the retail group operates approximately 400 hypermarkets under the Auchan and RT-Mart banners (similarly, Walmart operates about 450 retail stores in China). As part of the deal, France’s Auchan Retail will increase its stake in Sun Art to match Alibaba’s, forming an alliance to target opportunities in the billion dollar Chinese food retail sector.
The Alibaba of the future looks to transform classic retail by integrating technology so as to better manage inventory and improve margins. In a joint statement, the company spoke of the need to work closely with retail partners to provide a seamless online and offline experience to China’s 1.3 billion consumers, as well as look to expanding existing networks and tapping into the relatively untouched Chinese hinterland.
“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,”said Alibaba Chief Executive Officer Daniel Zhang in the statement.
Alibaba’s most recent investment in Sun Art is the latest acquisition in a series that’s also seen Suning Commerce and Intime Retail Group join the group. The $474 billion firm is making more moves to secure offline, rural and overseas buyers as China’s urban e-commerce market begins to saturate, including buying infrastructure (which the company has previously avoided).
While the retail experiment is only in its early stages, if successful, it could propel Alibaba into the lead over Amazon (AMZN) in the battle to connect the online and offline realms. While the winner is uncertain, Jack Ma’s head-start looked like investing billions into grocers, department stores and malls, long before Jeff Bezos’s Amazon announced the takeover of Whole Foods.
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