Alibaba goes offline with stake in brick-and-mortar retailer

Alibaba takes $2.9 billion stake in food retailer

"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", Daniel Zhang, Alibaba's chief executive officer, said in a statement. Auchan and RT-Mart have the biggest slice of China's hypermarket business, with about a 15-per-cent share, followed by Wal-Mart Stores Inc. with 10 per cent, according to Euromonitor.

The move is a part of Alibaba's plan to mark its presence felt in the traditional retail market.

The deal for Whole Foods marked a big point for entry by Amazon into the physical brick and mortar retail, but the move by Alibaba into offline started several years ago and this in the biggest part of the strategy.

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

Taobao China Holding, a subsidiary of Alibaba, has agreed to buy a direct 26 per cent stake from Kofu and Concord Greater China for HK$16.1 billion, at HK$6.5 a share, while it will also buy a 19.9 per cent stake in Auchan Retail, which owns 51 per cent of Sun Art, for HK$6.3 billion, also at HK$6.5 per share, according to an exchange filing by Sun Art.

Walmart, the world's largest retailer, is focused on turning around a sluggish Chinese operation through a partnership with JD.com, marrying online commerce with data and combining their network of warehouses and cold storage for same-day delivery to customers. So far, it has spent up to $9.3 billion since 2015. But later on it captured in supermarket brand Lianhua.

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That caused Sun Art's shares to drop in Monday trade, with the stock down around 4% at HK$8.27 late in the trading day.

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.

In January this year, Alibaba snapped up the remaining stake in InTime and took the company private.

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.

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.

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