Alibaba continued its growth into offline retail after the e-commerce giant based in China bought over a third of one of the most prolific Chinese operators of hypermarket stores.
The company announced on Monday it spent more than HK$22.4 billion equal to about $2.88 billion for a stake of 36.16% in Hong Kong listed Sun Art Retail Group that operators over 446 hypermarkets in 224 cities on mainland China.
The deal will make Alibaba Sun Art’s second biggest shareholder. Sun Art has a $10 billion market cap. Ruentex, a Sun Art shareholder that sold most of its stake to Alibaba, will keep a 4.67% while Auchan Retail a French retailer owns 36.18%.
This deal will bring about comparisons to the acquisition by Amazon of Whole Foods earlier this year for the price of $13.7 billion, but doing that would be an error in judgement.
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.
Alibaba acquired a stake of 35% of InTime the department store operator in 2014, and took a 20% share of Suning the retail giant in 2015 for $4.6 billion but in 2017 is when it picked up pace.
In January, Alibaba bought the remainder of InTime and took the business private, while during May it bought a share of Lianhua the supermarket brand.
The focus of the deal is offering a bridge between offline and online commerce, both for retailers themselves and users.
Alibaba believes it can use large amounts of data that it acquired through both its e-commerce as well as payment services to make an improvement in the consumer experience at its stores, while optimizing stock and fulfillment management.
Beyond services online such as Tmall and its marketplace Taobao, it can leverage Alipay, its payments service for mobile devices with more than 500 million users, as well as Cainiao its logistics offshoot that it just recently took complete control of.
Daniel Zhang the CEO at Alibaba said physical stores represent an indispensable role in the consumer journey, and must be enhanced through technology that is data-driven, and personalized services in today’s digital economy.
He added that by integrating fully online and physical, together with partners, we are looking forward to delivering a delightful and original shopping experience across all of China.