Alibaba Group will spend $3.6 billion to take control of Chinese supermarket giant Sun Art

Alibaba Group said today it will spend about $3.6 billion to take a controlling stake in Sun Art, one of China’s largest big-box and supermarket chains. After the transaction is complete, Alibaba Group will own 72% of Sun Art.

As in other countries, COVID-19 lockdowns increased demand for online food orders in China, drawing in shoppers who had still preferred to buy groceries in person. Even though lockdowns have lifted, many have continued to purchase online. Alibaba’s new investment in Sun Art will be made by acquiring 70.94% of equity interest in A-RT Retail Holdings from France-based Auchan Retail International. A-RT Retail holds about 51% of the equity interest in Sun Art.

After the deal closes, Alibaba will consolidate Sun Art in its financial statements. Sun Art chief executive officer Peter Huang has also been named its new chairman.

Alibaba first invested in Sun Art back in 2017, spending about $2.88 billion to pick up a 36.16% share in the chain, whose brands include RT-Mart, as part of its “New Retail” strategy.

“New Retail” aims to blur the lines between online and offline commerce through steps like turning physical stores in pickup points for online orders, integrating supply chains and enabling shoppers to use the same digital payment methods on its e-commerce platforms and in brick-and-mortar stores.

All of Sun Art’s 484 physical retail locations in China are now integrated into Alibaba’s Taoxianda and Tmall Supermarket platforms for groceries, as well as Ele.me and Cainiao, its on-demand food demand delivery app and logistics businesses, respectively. For customers, this means faster deliveries and larger selections, while giving Alibaba more sources of data it can use to improve its supply chain and business operations.

Other e-commerce companies are taking a similar approach to integrating offline and online grocery shopping, including Alibaba’s main rival JD, which has similar alliances with supermarket group Yonghui and Walmart.

In press statement, Alibaba chairman and chief executive officer Daniel Zhang said, “As the COVID-19 pandemic is accelerating the digitization of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience.”