Alibaba has stepped up
its online retailing game by taking a major stake in China’s top supermarket chain,
competing against JD.com in the fast-growing online grocery industry.
Alibaba will secure a majority stake in Sun Art Retail Group by spending 28 billion Hong Kong dollars
($3.6 billion). The online retailer will increase its stake to 72% from 36%, according
to the company in a Monday statement. The rest of the retail company will be
put up on a general offer for shareholders to buy.
Following the news,
shares of Sun Art went up nearly 20% in Hong Kong, while Alibaba’s shares in
Hong Kong also rose about 1%.
A controlling stake in
Sun Art will put Alibaba in a good position to compete against JD.com. During
its annual sales blitz in June, JD said its online grocery sales doubled over
Both online retailers are
in a fierce battle to dominate China’s e-commerce space as they use both
brick-and-mortar supermarkets and online shopping platforms to win shoppers. Alibaba
is quite popular for its online shopping platform. While JD has a chain of
brick-and-mortar stores across China, which also double as warehouses and
fulfillment centers. Also, JD has tie-ups with Walmart in China, and a local
grocery chain, Yonghui. Alibaba also has quite a number of brick-and-mortar
stores including its Freshippo grocery store chain and Sun Art stores used to
store and deliver online groceries. Sun Art has about 500 hypermarkets and
supermarkets across the country.
Jefferies analyst Thomas
Chong said in a Monday note that Alibaba is on the path to “accelerated digitization”
by stepping up its stake in Sun Art. He said the China e-commerce giant “has
been highlighting digitization as the greatest opportunity to change how people
live and work,” as well as, new “opportunities in traditional retail” which is
solving the problems of scalability and sustainability.
Despite the lifted
coronavirus lockdown restrictions in China earlier this year, 56 percent of
shoppers bought food and grocery online more frequently than in past times,
according to an Alibaba report in June. GlobalData found that nearly 30 percent
pf shoppers in the United States bought food and grocery online more often than