Alibaba announced its decision to purchase a controlling share in the country’s largest hypermarket network, Sun Art.
According to Nikkei Asia Review, the Alibaba Group Holding will grow its stake in Sun Art to around 72%. The Chinese e-commerce giant will buy a majority share of A-RT Retail from France’s Auchan Retail. A-RT Retail owns a majority stake in Sun Art.
The Sun Art network runs 486 outlets, and Alibaba’s purchase is considered as an extension of its “New Retail” strategy. Alibaba aims to merge online and offline operations, from supply chain to logistics.
CEO and Chairman Daniel Zhang, who leads the strategy, explains that the pandemic has spurred the rise of online grocery in China.
"As the COVID-19 pandemic is accelerating the digitization 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," Zhang said in a statement.
Since Alibaba bought a minority stake in Sun Art in 2017, the e-commerce firm has integrated the physical outlets of the hypermarket chain to its online platforms, according to Nikkei.
With this, online shoppers who use Alibaba's Tmall Supermarket, Taoxianda, and Ele.me platforms are able to shop at Sun Art and have their items delivered to them in an hour.
Alibaba’s Freshippo/Hema supermarket chain, which launched in Shanghai in 2016 and now has around 200 branches, is a product of the company's New Retail strategy.
Expanding beyond China
Alibaba must expand its presence beyond China and Southeast Asia, according to Gil Luria, director of research at D.A. Davidson.
Alibaba, Luria says, could hit saturation any time with more than 750 million active users in China.
The company could be seeing opportunities in lower-tier Chinese cities, but Luria mentioned that aside from the tight competition, the markets there are not as rich as the top-tier cities.
“Their growth is going to have to come from outside of China,” he told CNBC’s “Squawk Box Asia.” “For them to sustain the levels of growth they have right now, with China approaching saturation, Southeast Asia is only going to carry them for so long before they have to get into some of those other markets in order to sustain this growth,” he added.
Latin America and Africa are among the potential growth markets for Alibaba. The eCommerce giant has already established its presence in Southeast Asia through the e-commerce platform Lazada, in which it owns a majority stake.
The major source of revenue for Alibaba is its China retail marketplaces that include shopping platforms like Tmall and Taobao and its online-to-offline grocery chain.
Cloud computing business
Meanwhile, finance chief Maggie Wu said that Alibaba is optimistic about its cloud computing business in the current fiscal year.
In a 2018 interview, Zhang told CNBC that Alibaba cloud computing business could become its “main business” someday.
Zhang said in a speech that the technology is a “growth engine” but noted that the world is in a “nascent stage of the global cloud era.”
