Internet giant Alibaba Group Holding Ltd. announced on Monday that it would invest $ 22.4 billion ($ 2.87 billion) for a significant portion of China's leading hypermarting operator, Sun Art Retail Group Ltd, as part of a broader strategy.
As part of an alliance with Auchan Retail SA and Ruentex Group, Alibaba would buy out Ruentex's stake while Auchan Retail would increase its stake, said the three companies in a joint statement.
The alliance would target opportunities in the $ 500 billion food retail sector in China, with Alibaba shopping to develop important data capabilities in the offline market where about 85% sales are made. "Physical stores play an indispensable role in the consumer journey and should be enhanced through data-driven technology and personalized services in the digital economy," said Alibaba's general manager, Daniel Zhang.
Sun Art shares, listed in Hong Kong and suspended on November 13, resumed Monday and fell 5.3% in the morning, while the benchmark was stable.
The agreement would give the French group Groupe Auchan SA, the Chinese group Alibaba Group and the Taiwanese conglomerate Ruentex respectively 36.18%, 36.16% and 4.67% of the shares of Sun Art. Alibaba would replace Ruentex as the second largest shareholder.
Alibaba has invested more than $ 9.3 billion in physical stores since 2015. It has launched many unmanned concept shops in the past year, including grocery stores and coffee shops.
The $ 474 billion business takes more risks to secure offline, rural and foreign buyers because the urban e-commerce market in China is showing signs of saturation, including the purchase extensive infrastructure that she had previously avoided.
"They enter a territory that is not their main strength … for example, securing a property, licenses to sell certain products, paying taxes, more work, etc. ., "said Weiwen Han, Managing Partner China at Bain & Company.
"On one side, they really need to do it, but on the other hand, they face many challenges that they have never known before."
Sun Art is the leading grocery store in China with about 8.2 percent of the market, according to data from Kantar Worldpanel.
It operates around 450 hypermarkets across China under the banners RT-Mart and Auchan. It also operates unmanned stores under the Auchan Minute brand.
He was slow to go online, with his Feiniu platform lagging behind bigger players like China Resources and Wal-Mart Stores Inc.