Alibaba pumps billions more dollars into China's brick-and-mortar market

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Sun Art runs 446 hypermarkets across 29 provinces, municipalities and autonomous regions of China under "Auchan" and "RT-Mart" banners.

Wilhelm Hubner, Chief Executive Officer of Auchan Retail, said the deal with Alibaba reflects the common aspirations they have toward the future of commerce in China.

That caused Sun Art's shares to drop in Monday trade, with the stock down around 4% at HK$8.27 late in the trading day.

Alibaba said it will work closely with its new retail partners to provide Chinese consumers with a new food shopping experience that seamlessly merges online and offline experience for customers.

Alibaba's essentially using Sun Art to quicken an assault on the $4 trillion brick-and-mortar retail arena, escalating competition with Wal-Mart in the hypermarts that hawk everything from fresh produce to electronics.

"In recent years, consumers' demands have changed tremendously with the rapid growth of the mobile internet, and Sun Art is also endeavoring to move from offline to online", said Ruentex Vice Chairman Peter Huang.

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Alibaba noted in a press release that this alliance is part of its New Retail push. And if Alibaba's announcement this morning sounds like a slightly less ambitious iteration of Amazon's acquisition of Whole Foods for $13.7 billion earlier this year, that seems to be the case as well. The investment will be made via Taobao, a popular online shopping platform of Alibaba.

"Physical stores serve an indispensable role during the consumer journey, and should be enhanced through data-driven technology and personalized services in the digital economy", Zhang said.

The US$474 billion firm is taking more risks to secure offline, rural and overseas buyers as China's urban e-commerce market shows signs of saturating, including purchasing extensive infrastructure which it had previously avoided.

"They're getting into a territory that's not their core strength ... for example, securing a property, the licenses to sell certain products, paying tax, more labor and so on", said Weiwen Han, a Bain & Company analyst. He added that Alibaba was "facing a lot of challenges" that they had never experienced before.

Alibaba has already rolled out 20 Hema supermarkets in China and also has a strategic partnership with China's largest supermarket operator Bailian Group and a stake in Bailian Group's largest chain Lianhua Supermarket.