BEIJING • Internet giant Alibaba Group said yesterday it would invest HK$22.4 billion (S$3.9 billion) for a major stake in China's top hypermart operator, Sun Art Retail Group, as part of a wider push into offline retail.
As part of an alliance with Auchan Retail and Ruentex Group, Alibaba would buy the stake from Ruentex while Auchan Retail would boost its stake, the three companies said in a joint statement.
The alliance would target opportunities in China's US$500 billion (S$678 billion) food retail sector, as Alibaba races to build big-data capabilities in the offline retail market where roughly 85 per cent of sales are made.
"Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalised services in the digital economy," Alibaba chief executive officer Daniel Zhang said in the statement.
Shares of Hong Kong-listed Sun Art, which were suspended on Nov 13, resumed yesterday and were down 5.3 per cent in morning trade, while the benchmark index was flat.
The deal would give French retailer Groupe Auchan, China's Alibaba and Taiwanese conglomerate Ruentex 36.18 per cent, 36.16 per cent and 4.67 per cent stakes respectively in Sun Art. Alibaba would replace Ruentex as the second-largest shareholder.
Alibaba has invested upwards of US$9.3 billion in brick-and-mortar stores since 2015, and has launched many unstaffed concept shops in the past year.
The US$474 billion firm is taking more risks to secure offline, rural and overseas buyers as China's urban e-commerce market shows signs of saturating, including purchasing extensive infrastructure which it had previously avoided.
"They're getting into a territory that's not their core strength... for example securing a property, the licences to sell certain products, paying tax, more labour and so on," said Mr Weiwen Han, managing partner for Greater China at Bain & Company.
"On the one hand, they really need to do it, but on the other hand, they are facing a lot of challenges that they have never experienced before."
Sun Art is China's grocery store leader with about 8.2 per cent of the market, according to data from Kantar Worldpanel.
It operates about 450 hypermarkets across China under the RT-Mart and Auchan banners, but it has been slow to go online.
Sun Art said Alibaba's Taobao China would make a general offer for the firm at HK$6.50 apiece, in a separate statement.