Alibaba has made a major push into bricks-and-mortar retail after acquiring a controlling stake in Chinese hypermarket giant Sun Art Retail.
Shares in Sun Art skyrocketed more than 27 per cent this morning, after Alibaba announced plans to more than triple its stake in the company from 21 per cent to 72 per cent.
The $3.6 billion deal will see Alibaba, China’s most valuable online retailer, take control of Sun Art’s 481 hypermarkets across the country, dramatically expanding its physical retail presence.
“As the COVID-19 pandemic is accelerating the digitalisation of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience,” Alibaba chairman and chief executive officer Daniel Zhang said.
Zhang’s ‘New Retail’ strategy is largely in line with Amazon’s in the US, aiming to combine its vast high-tech logistics and delivery network with physical grocery stores to break into the market.
The pandemic has rapidly accelerated demand for fast and reliable grocery delivery services, intensifying the scramble for both traditional grocers and online retailers to expand their operations.
According to Bloomberg Intelligence analyst Kevin Kim, this deal suggests Alibaba “seeks to further expand its one-hour home grocery delivery services such as Taoxianda, leveraging the grocer’s extensive offline hypermarts across China.
“This could capture consumers flocking to online platforms, further induced by Covid-19 early this year, yet may hurt foot-traffic to the grocer’s physical stores.”