Alibaba invests $2.88 billion in Sun Art Retail

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Alibaba Group said Monday it will acquire a 36.16% stake in China's hypermarket operator Sun Art Retail Group for 2.88 billion US dollars, an investment that further underscores its commitment to New Retail.

With the deal, Hangzhou-based Alibaba will form a strategic alliance with two strong players in China’s retail market: Auchan Retail and Ruentex Group. This brings together their online and offline expertise to explore new retail opportunities in China’s food retail sector.

The transaction involves Alibaba acquiring Sun Art shares from Ruentex. At the same time, Auchan is also upping its stake in Sun Art. Upon completion of the transactions, Auchan Retail, Alibaba Group and Ruentex approximately will have 36.18%, 36.16%, and 4.67% economic interest in Sun Art, respectively. Auchan Retail will continue to consolidate Sun Art in its financials following the transaction.

Sun Art Retail Group logo

Alibaba said the Sun Art investment is the latest illustration of Alibaba’s efforts to seamlessly merge online and offline shopping into an “omnichannel” consumer experience, leveraging its own assets, ecosystem and technology.

“Alibaba is excited to join with our new partners to redefine traditional retail through digital transformation,” said Daniel Zhang, chief executive officer of Alibaba Group.

“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,” he said. “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.”

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 (大润发) and Auchan (欧尚) banners. It also operates superstores and innovative unmanned stores under the Auchan Minute brand.

The alliance reflects Alibaba’s “New Retail” vision to leverage its Internet-based approach and new technology, while working closely with retailer partners to provide a seamless online and offline experience to consumers in China.

It also aligns with Auchan Retail’s Vision 2025 “Auchan changes lives.” Building on the strengths of the three partners, the alliance aims to introduce a new shopping experience to China’s 1.3 billion consumers.

Earlier in July, Alibaba launched Hema, as part of its initial “New Retail” efforts. In this digitized physical supermarket chain, shoppers can 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.

Alibaba's chairman, Jack Ma in Hema Supermarket /Photo from public pool

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 has also established strategic cooperation with traditional retailers, including Yintai, Suning, Sanjiang, and Bailian, in upgrading its blend of online and offline businesses.

Jack Ma speaking at the New Retail partnership with Bailian on Feb 20, 2017 in Shanghai. /VCG photo

Noting that online retail market is still under-penetrated at the rate of 15 percent of total retail market size, some analysts expect Alibaba's strategy to lead the market in going after China's large number of consumers who still shop offline.

The idea of e-commerce players moving into brick-and-mortar spaces has seen big moves in recent years – as Internet companies attempt to capture more of the offline retail market. Most notably, earlier this year, Amazon said it planned to buy US grocery store chain Whole Foods Market in a deal valued at 13.7 billion US dollars, CNBC reported.

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 51.7 billion euros last year. Taiwan-based Ruentex is involved in property rental and sales, construction, logistics and retail, operating supermarkets, hypermarkets and department stores.