On Monday, Alibaba Group Holding Ltd (NYSE: BABA) announced plans to invest $2.87 billion in China’s top hypermart operator, Sun Art Retail Group Ltd to expand their footing in offline retail. The company is to also create an alliance with Ruentex Group and Auchan Retail S.A. where Alibaba will buy the stake from Ruentex and Auchan Retail will boost the stake.
This would target opportunities in China’s $500 billion food retail industry as Alibaba seeks to build big data capabilities in the offline retail market where about 85% of sales are made.
Following this announcement, Sun Art’s shares dropped 5.3%. This alliance between the 3 firms would give Auchan 36.18%, Alibaba 36.16%, and Ruentex 4.67% stakes making Alibaba the second largest shareholder. Since 2015, Alibaba has invested $9.3 billion in brick and mortar stores and launched many shops in the past year such as grocery and coffee stores.