Chinese e-commerce giant Ali Baba Has announced that it wants to buy China’s largest hypermarket chain for $ 3.6 billion. The chain is Walmart’s biggest rival in the world’s most populous market.
Alibaba, which operates out of Hangzhou and now has the largest value in China – over $ 800 billion – said yesterday it intends to double its stake in Sun Art Retail, which operates more than 480 large department stores in China.
The corona plague has accelerated the transition of consumers to shopping from home. As in the US, supermarket sales in China were a bright spot in the retail world, thanks to consumers stocking up on food and other staples when restaurants closed.
Alibaba first bought a 36% stake in Sun Art for about $ 2.9 billion in 2017. The company, which is registered in Hong Kong and started as a French-Taiwanese joint venture, operates stores in China under the RT-Mart and Auchan brands.
Following the current deal, Alibaba will own about 72% of the company, whose revenues in 2019 totaled $ 14.2 billion. In the first half of this year, Sun Art’s revenue rose 5% to $ 7.9 billion.
Sun Art is not a well-known brand in China, but its big stores sell everything from food to clothing and toys, and its share of hypermarket sales in China last year was 14.1%, according to Euromonitor.
Walmart had a 10.3% market share in China in the same category, of retail space over 2,500 square meters. In 2016, the American retailer sold its Chinese e-commerce site to JD.com, Alibaba’s main rival in e-commerce. Walmart’s said in a conference call with investors in August that recent sales in China were particularly strong.
Alibaba is building a presence in the physical food stores market in China, using them to expand its e-commerce capabilities.
The company now owns Pershipo, a growing supermarket chain with 220 stores across China for fresh produce and groceries. Buyers can go to stores or place orders online, which are delivered within a few hours. The Pershipo network was an idea of Alibaba chairman and CEO Daniel Zheng. Sales of its stores, which have been in existence for at least a year, increased in double digits in April-June, largely due to an increase in online orders in the plague.
Taking over Sun Art will help Alibaba continue to advance its new retail strategy, which combines online and physical resources, the company said yesterday. There could be further synergies with other Alibaba businesses, Zheng said in a statement.
The deal could allow Alibaba to accelerate its sales growth in fast-buying consumer products, Citigroup analysts said in a review yesterday. Sun Art recently reported a jump in online sales, and its previous collaborations with Alibaba, including its delivery service, have already helped it gain new customers.
Alibaba increased its holding in Sun Art by buying a majority of the holding company from the French international company Auchan. Sun Art shares rose 19% yesterday to $ 11.6 billion. It is expected to continue trading on the Hong Kong Stock Exchange.
Last year, French Carrefour, one of Europe’s largest food chains, sold most of its operations in China to a local chain after struggling to compete with China’s faster delivery providers.
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