Alibaba Group Holding Limited (NYSE: BABA, Alibaba), Auchan Retail (“Auchan Retail”) and Ruentex Group S.A. (Ruentex) announced a strategic alliance that will enable them to combine their expertise in offline and online commerce to build “phygital” (in convergence between physical and digital) food trade in China. Within this strategic alliance, Alibaba Group will invest a total of HK $22.4 billion (equal to US $2.88 billion) to hold 36.16% of Sun Art Retail Group Limited‘s capital with the purchase of shares previously held by Ruentex. Auchan Retail will strengthen its participation in the capital of Sun Art as well. At the end of this transaction, Auchan Retail, Alibaba Group and Ruentex will hold respectively 36.18%, 36.16% and 4.67% of Sun Art’s capital. Auchan Retail will continue to consolidate its Sun Art subsidiary into its financial statement. Sun Art has recently entered the market with Auchan Minute’s automated digital mini stores: a network that should count hundreds of retail outlets by the end of the year.
“New Retail”
The alliance follows Alibaba’s “New Retail” vision – that seeks to capitalize on online approach and new technologies by partnering with its business partners to meet Chinese consumers’ expectations – and Auchan Retail Vision 2025 named “Auchan changes your life”. The goal is to offer 1.3 billion Chinese consumers a new shopping experience, which should be “phygital”. Together with its new partners, Alibaba Group is pleased to be able to redesign the trade of the future thanks to digital transformation – said Daniel Zhang, CEO of Alibaba Group. By combining our online and offline channels and those of our partners, we look forward to offering Chinese consumers an original and enjoyable shopping experience. Wilhelm Hubner, CEO of Auchan Retail, stated: The alliance with Alibaba has been enabled by our shared vision for the future of commerce in China. Summoning the world’s leading global business partners in China’s physical and digital commerce will enable us to offer hundreds of millions of Chinese consumers an integrated shopping experience of excellent quality.
Digital environment
Combining the strengths of the three companies, the new alliance will enable Sun Art to benefit from Alibaba’s digital ecosystem – which will digitize and bring into the Sun Art (RT-Mart and Auchan) phygital solutions – as a perfect fulfillment process and an increasingly personalized customer experience. The idea is to offer online and offline synergies that will change consumers’ life by offering them new products and more efficient services. In recent years, consumers’ demand has radically changed with the rise of mobile Internet. Sun Art is indeed integrating online dimension into its offline business said Peter Huang, Vice President of Ruentex Group.
The Chinese market
The offline wholesale market in China is worth $4 trillion, and it is also one of the world’s number one retailer’s targets: Walmart, which in January 2017 held 424 outlets in China, only four more compared with 2016. Walmart has also thought of integrating the physical sale network with strong e-commerce plus, such as fast delivery and data analysis, by acquiring Jet.com online operator. The same operation – albeit inversely, from digital to physical – was carried out by Amazon with the recent acquisition of Whole Foods Market.