CHINA – Alibaba, an ecommerce giant, has agreed to acquire a controlling stake in Chinese largest hypermarket operator Sun Art Retail Group from French retailer Auchan, for approximately US$3.6 billion.
This acquisition comes as Alibaba seeks to strengthen its online grocery delivery capabilities in the wake of Covid-19, as well as its offline retail offering, in an effort to stave off competition in the high-growth market from ecommerce rivals such as JD.com, Meituan and Pinduoduo.
Alibaba previously acquired a 36% stake in Sun Art in 2017 but has now agreed to increase its stake to 72%. According Bloomberg, Alibaba will also make a further offer worth approximately US$2.2 billion to remaining Sun Art shareholders, in order to take full control of the retailer.
Sun Art is one of China’s largest grocery retailers, operating over 400 hypermarkets and supermarkets throughout the country.
“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.”Daniel Zhang – Chairman and CEO, Alibaba
“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 CEO Daniel Zhang said.
All of Sun Art’s physical stores have been integrated into Alibaba’s platforms, providing one-hour and half-day on-demand delivery through collaboration other Alibaba businesses such as online food delivery service platform Ele.me and Cainiao, a logistics subsidiary, according to the statement.
“This is an interesting move by Alibaba, as it will no doubt improve the firm’s ability to source and distribute food direct to the consumer, which in turn challenges brand owners to maintain visibility and more importantly ‘pull’ from off the shelf or in this case ‘e-shelf’,” Mark Lynch, partner at corporate finance advisory firm Oghma Partners, said.
In this respect, it could further shift the dynamic between supplier and distributor and not necessarily in a good way for the suppliers.”
As part of this strategy, Alibaba has expanded the number of outlets utilised by its Freshippo supermarket chain, which also provides an online delivery service. Alibaba currently operates 214 Freshippo outlets in China, as of its most recent earnings report.
The Chinese e-commerce giant is now grappling with intensifying competition from the likes of JD, food delivery giant Meituan Dianping and startups such as Tencent Holdings Ltd.-backed Missfresh, all chasing a market for groceries and fresh produce that HSBC expects to grow 2.5 times to 690 billion yuan (US$103 billion) by 2022 from 2019.
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