E-commerce giant buys stake in hypermarket operator Sun Art Retail

Alibaba Group Holding Ltd is expanding into offline retail by acquiring over one-third of the stakes in China's largest hypermarket chain operator.

The e-commerce giant announced on Monday it would purchase 36.16 percent of Sun Art Retail Group, which has the biggest slice of China's hypermarket business with a market share of around 15 percent, according to consultancy Euromonitor International.

It operates around 450 hypermarkets across China under the RT-Mart and Auchan banners.

The HK$22.4 billion ($2.88 billion) deal would make Alibaba the second-largest stakeholder in a business that generated 100 billion yuan ($15.09 billion) of revenue in 2016.

Ruentex Group, the shareholder that sold the stakes to Alibaba, will retain a 4.67 percent share, while French retailer Auchan Retail SA owns a dominant 36.18 percent.

Alibaba CEO Daniel Zhang, at a news conference in Hong Kong on Monday, said: "To join forces with Sun Art－the largest hypermarket operator of its kind in the world's second-largest economy, Alibaba is looking to seamlessly integrate more than 500 million 'super consumers' at its e-commerce platform that sells everything from fresh products to electronics, with Sun Art's well-established brick-and-mortar retail network."

"As the country's 'super consumers' are growingly reshaped by the internet, the boundary between the online and offline retail arenas continues to be blurred," Zhang said. "It becomes a big trend for an e-commerce giant and a hypermarket operator to form a strong alliance."

The move came amid an investment spree the tech giant started in 2014, including buying department store chain Intime Retail Group Co Ltd in January and invested in Shanghai-based supermarket brand Lianhua in May.

It is pushing ahead with its New Retail strategy, merging online and offline commerce by using the colossal amounts of data it collected through e-commerce and payment services.

"The New Retail strategy is at its starting point and is hard to know whether it can completely change the retail landscape. But it is worthy of reforming the retail structure and driving efficiency through the internet technology," said Jason Yu, general manager of Kantar Worldpanel China. Sun Art Retail's widespread stores in third and fourth-tier cities are expected to serve as a service point for Tmall to deliver their groceries, he said.