Alibaba Invests $2.88B in Latest China New Retail Alliance

Alibaba Group said Monday it will invest HK$22.4 billion ($2.88 billion)  for a 36.16% stake in Sun Art Retail and provide technical guidance to the Chinese hypermarket operator as it digitizes its operations.

The investment further underscores the Hangzhou-based tech giant’s commitment to New Retail, an innovative business model that seamlessly blends online and offline shopping into an “omnichannel” consumer experience.

It’s also part of a three-way strategic alliance Alibaba is forming with two leading players in China’s retail sector–Auchan Retail and Ruentex Group. Through the deal, Alibaba will acquire its stake from Ruentex, whose Sun Art shareholding will decrease to 4.67%. Auchan will acquire shares and raise its stake to 36.18% in Sun Art upon the deal’s completion.

Alibaba Chief Executive Officer Daniel Zhang told reporters in Hong Kong the investment is in line with Alibaba’s mission of enabling retailers around the world to enhance consumers’ shopping experience and boost business efficiency through the use of analytics.

As one of China’s most well-respected retail operators, Sun Art provides a strong foundation for New Retail exploration by building on its two decades of experience in China’s retail space, Zhang said. The initial stage of the tie-up will focus on digitizing Sun Art’s operations to increase the retailer’s understanding of its customers shopping habits, improving its product selection, as well as the design of its storefronts.

“Alibaba is excited to join with our new partners to redefine traditional retail through digital transformation,” said Zhang.

Auchan Retail’s Chief Executive Officer Wilhelm Hubner said the shared commitment among the partners to digital transformation will help retailers meet Chinese customers’ increasing demand for higher-quality goods and services.

“This alliance with Alibaba stems from our shared vision for the future of commerce in China,” he said.

The strategic alliance also presents a key opportunity for Alibaba to explore markets beyond China, said Zhang, highlighting the international reach of Auchan’s operations as a strong foundation. Auchan has retail operations in 17 countries. It will continue to consolidate Sun Art in its financials following the deal.

“Going forward, we will explore various opportunities together with Auchan and try to improve our services in (overseas) markets,” remarked Zhang.

Sun Art is a leading multi-format offline food retailer in China. It operates 446 hypermarkets as large as 17,000 square meters in 29 provinces, municipalities and autonomous regions across China under the RT-Mart and Auchan banners. It also operates superstores and innovative unmanned stores under the Auchan Minute brand.

This Sun Art investment is the latest in a series of New Retail-related investments Alibaba has made or announced recently.

Alibaba launched Hema, its digitized physical supermarket chain where shoppers use a mobile app for online orders and in-store purchases of groceries or freshly prepared foods, as well as research products while shopping and pay digitally or with facial recognition. Hema deliveries are fulfilled by the store, itself, from an adjacent logistic center, in as fast as 30 minutes and a three-kilometer radius.

In June, Alibaba agreed to purchase an 18% stake in Hong Kong-listed Lianhua Supermarket with the aim of boosting business efficiencies and enhancing customer experience.

Alibaba also led a $300 million, D-round investment in Yiguo.com, China’s largest B2C fresh produce online marketplace, back in August. The funding, Alibaba’s fourth injection of capital into the grocery-shopping platform, is being used to further develop Yiguo subsidiary ExFresh, China’s largest cold-chain logistics platform.

Auchan Retail is part of France’s privately held Groupe Auchan SA. The retailer operates 3,715 points of sale in 17 countries and had revenue of EUR 51.7 billion last year. Taiwan-based Ruentex is involved in property rental and sales, construction, logistics and retail, operating supermarkets, hypermarkets and department stores.