Alibaba intensifies China retail rivalry with Tencent on back of US$3.6 billion Sun Art deal
- Alibaba’s move to take control of hypermarket operator Sun Art is expected to push forward its ‘new retail’ strategy in China
- The stakes are high for Alibaba amid predictions that China will soon edge out the United States as the world’s largest retail market
“The race to digitise retail in China is a two-horse race [between Alibaba and Tencent], and Tencent is actually further along,” said Jordan Berke, founder and chief executive of Tomorrow Retail Consulting. “Many national retailers have affiliated themselves with Tencent, and that has created a disadvantage for Alibaba.”
Alibaba, which runs the world’s biggest e-commerce platform, on Monday moved to bridge that gap with a transaction that doubles its stake in Hong Kong-listed Sun Art to 72 per cent. Alibaba, parent company of the South China Morning Post, agreed to buy a 70.9 per cent stake in A-RT Retail Holdings, which owns 51 per cent of Sun Art.
“The increased stake in Sun Art is … a natural step for Alibaba because it needs more physical locations to be able to achieve its ‘new retail’ vision,” said Berke, whose company works with the likes of Walmart, Sam’s Club and Tencent.
The stakes are high for Alibaba amid predictions that China will soon edge out the United States as the world’s largest retail market. China is forecast to record US$5.1 trillion in retail sales this year, compared with US$4.9 trillion in the US, according to research firm eMarketer.