Alibaba announces latest move into offline, and new retail strategic alliance with Auchan

This is the 2nd tech alliance and share purchase agreement between Auchan, Sun Art and Alibaba

Eva González Hong kong, 19 November, 2017

Alibaba Group Holding Limited (Alibaba), Auchan Retail S.A. (Auchan) and Ruentex Group (Ruentex) – textile retailer headquartered in Taiwan- today announced a strategic alliance that brings together their online and offline expertise to explore new retail opportunities in China’s food retail sector.

This move of Alibaba Group into offline retail comes in a context where not only Alibaba but other Chinese ecommerce giants are shifting into offline to grow.

As reported by Kantar in its latest Kantar World Panel China comments (3Q 2017), besides more frequent promotions and driving sales through more themed ‘Brand Day’ activities, both Alibaba and JD are advancing rapidly into offline.

Alibaba has invested in Yiguo, the leader in fresh foods ecommerce, and recently invested another RMB 5.3Bn in Cainiao Logistic network. The Chinese Giant has also and announced its plan to transform millions of mom-and-pop stores into a vast network of Tmall offline stores through a data-backed retailer management system. This new system is aimed to enhancing traditional grocery’s capabilities in merchandising, delivery and inventory management.

Alibaba reported through Alizila launch of Hema, its digitized physical supermarket chain where shoppers 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. Hema deliveries are fulfilled by the store, itself, from an adjacent logistic center, in as fast as 30 minutes and a three-kilometer radius.
It also informa that 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.

As published by Sun At Retail Group.

Chinese ecommerce giants’ moves into offline within their domestic market, not only eye to expand its online footprint, but also to grow their reach among shoppers who are not digitally literate in lower tier cities and rural China.

Sun Art currently operates 446 hypermarkets as large as 17,000 square meters in 29 provinces, autonomous regions and municipalities across China under the “RT-Mart” and “Auchan” brands. It also operates superstores and innovative unmanned stores under the “Auchan Minute” banner.

As reported by Sun Art Retail Group.

The e-commerce business platform of Sun Art Retail: officially started off operations on 16 January 2014 and achieved nationwide coverage in May 2015. joined Sun Art Retail in April 2015 and acquired Xiaohehe, a mobile O2O platform targeting at university campuses in September 2015. In September 2015, the Group has set-up the vertical platform specialized in wines, Auchanwines

As of 3Q 2017. © Sun Art Retail Group.

Sun Art Group is striving to build its own exclusive brands. As of 31 December 2016, its brand “Actuel”, specializing in general goods, home textile and tableware, achieved a  sales growth at 88%. Newly added brands, such as the traditional Chinese cuisine brand “Hui Shang”, imported mineral water brand “ALLEGRA” and gardening brand “Garden star”, are expected to become a source of growth for the Sun Art Group in the future.

Alibaba and Auchan increase stake in Sun Art

As part of this strategic alliance, Alibaba Group will invest a total of HK$22.4Bn (approximately US$2.88Bn) to obtain an aggregate direct and indirect stake of 36.16% in Sun Art Retail Group Limited (Sun Art) by acquiring shares from Ruentex.

Peter Huang, Ming-Tuan (Executive Director and Chairman of RT-Mart China) -left- and Ludovic Frédéric Pierre Holinier (Executive Director and Chief Executive Officer Sun Art retail) -right-. Sun Art Retail. © Sun Art retail.

This is not the first take of a share in the capital equity of Sun Art by Alibaba Group.
In 2016 Taobao had already agreed to acquire a 26.02% interest in the capital equity of Sun Art Retail at a price of HK$6.50 per share payable in cash.

Auchan Retail is also increasing its stake in Sun Art. The transaction will give Auchan Retail, Alibaba Group and Ruentex approximately a 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.

A tech alliance, but not the first one between Auchan and Alibaba in China

Combining the resources of the three companies, the new alliance will enable Sun Art’s activities to benefit from Alibaba’s digital ecosystem. It will digitize and introduce new retail solutions at Sun Art stores, including online and offline integration together with modern fulfillment and personalized customer experience.

Sun Art is a leading multi-format offline food retailer in China. As of June 30, 2017, Sun Art operated with a total gross floor area of approximately 12 million square meters in China.

Daniel Zhang, Chief Executive Officer of Alibaba Group. © Alibaba group.

The alliance reflects Alibaba’s “New Retail” vision, says the online retail giant, 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 1.3Bn consumers.

The first alliance between Sun Art, Auchan China and Alibaba Group was signed in 2016 as part of the first share purchase agreement of Sun Art titles by Taobao. the purchase contract came with acooperation agreement in the tech field between Auchan China, RT Mart China and Taobao, under which Hangzhou Alibaba Zetai Information Technology Company Limited (being an indirect whollyowned subsidiary of Alibaba Group) was to providing tech services including: granting access by the stores operated by Auchan China and RT Mart China to its business model and online platform; data sharing; and integration of systems and POS hardware, as part of its “Taobao Daojia” service offering to the stores operated by the Group.

A win win alliance in the field of smart retail

Wilhelm Hubner, Chief Executive Officer of Auchan Retail. © Auchan Retail.

“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. 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.”

Wilhelm Hubner, Chief Executive Officer of Auchan Retail, said, “This alliance with Alibaba stems from our shared vision for the future of commerce in China. Bringing together the leaders of in-store retail and of online retail will allow us to serve hundreds of millions of Chinese consumers a fully integrated, world-class shopping experience.”

“In recent years, consumer’ demands have changed tremendously with the rapid growth of the mobile internet, and Sun Art is also endeavoring to move from offline to online,” said Peter Huang, Vice Chairman of Ruentex Group. “Ruentex is delighted to see the win-win collaboration between Sun Art and Alibaba with high synergies in online and offline that will meet the needs of consumers for a better life with better products and services and higher efficiency.”

Image over the headline.- RT-Mart Taian (China). By N509FZ (Own work) [CC BY-SA 4.0 (], via Wikimedia Commons. To watch the original photo, clic here

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