Alibaba Group Holding Ltd. (NYSE:BABA) has decided to invest $2.9 billion in the supermarket operator of China, Sun Art Retail Group Ltd, which is known as the biggest competitor of Wal-Mart Stores Inc (NYSE:WMT) in the country’s grocery market. Alibaba is expected to get 36% stake in Sun Art that has around 450 hypermarkets across China under the RT-Mart and Auchan brands.
The Euromonitor International, the global business intelligence firm says that Sun Art has a stake of 14.6% in China’s hypermarket sector followed by China’s Wal-Mart at 10.2%. China Resources Power Holdings Co. Ltd. with a stake of 15.5% leads the Chinese hypermarket business.
Reports suggest that Alibaba is investing in the Taobao unit of Sun Art to establish its presence in the offline commerce. The e-commerce Chinese giant is also planning to invest around $200 million in Bigbasket, the largest online supermarket in India. The Chinese company will get a stake of around 25% in the Bangalore-based company.
The deal was confirmed after months of negotiations between the officials of the two companies.
Alibaba Faces Tough Challenge From Tencent Holdings Ltd (OTCMKTS:TCEHY)
It is, however not all smooth for Alibaba as it now will have to face challenges from Tencent Holdings that operates the WeChat, the ubiquitous Chinese messaging app. Tencent is poised to acquire a stake in Vipshop Holdings Ltd – ADR (NYSE:VIPS), a US-listed company. Alibaba leads the online clothing sales in China and accounts for four-fifths of its online clothing business.
Tencent and JD.com the second largest retailer of China together are planning to invest a combined amount of U.S. $863 million cash in Vipshop, the popular online fashion retailer. According to a report, this deal indicates that Tencent is determined to challenge and compete directly with the Alibaba Group in the retailing sector. Tencent is already a major shareholder in JD.com which has fired Alibaba Group for pressuring the clothing merchants to choose sides.
It is going to be an uphill task for the Chinese giant to take on the combined challenge of Tencent and JD.com.