Alibaba to Pursue Offline Retail Market

People ride a double bicycle past a logo of The Alibaba Group

People ride a double bicycle past a logo of The Alibaba Group

Sun Art Retail Group Ltd operates over 400 hypermarkets under the Auchan and RT-Mart banners.

Analysts believe the deal will have a "positive impact" on both Alibaba and Sun Art.

The Sun Art Group is a major offline retail player in China.

The deal would hand Groupe Auchan, a French retailer, Alibaba Group, a Chinese company, and Ruentex, a Taiwanese firm, a 36.18 percent, 36.16 percent, and 4.67 percent stakes, respectively, in Sun Art. Alibaba would change Ruentex as the second-largest shareholder in the business, which has a market cap of over US$10 billion. It also runs unstaffed stores under the "Auchan Minute" brand.

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.

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. "By fully integrating online and physical channels together with our partners, we look forward to delivering an original and delightful shopping experience to Chinese consumers".

With 20 Hema supermarkets already rolled out in China, the group continues to make one after another strategic alliance, first with China's biggest supermarket operator Billian Group and later, with a stake in Lianhua Supermarket, which happens to be Billian Group's largest chain of Supermarkets.

In August, Amazon bought U.S. 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.

The $474 billion firm is taking more risks to secure offline, rural and overseas buyers as China's urban e-commerce market shows signs of saturating, including purchasing extensive infrastructure which it had previously avoided.

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.

"They're getting into a territory that's not their core strength. for example securing a property, the licences to sell certain products, paying tax, more labour and so on", said Mr Weiwen Han, managing partner for Greater China at Bain & Company. He added that Alibaba was "facing a lot of challenges" that they had never experienced before.

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