Alibaba is Moving Ahead of Amazon in One Important Category

Alibaba Acquires Majority Stake in Chinese Supermarket Giant Sun Art for $3.6 Billion

Amazon might be ahead of Alibaba in the Cloud, AI, advertising and some aspects of the future of healthcare, but Alibaba is certainly beating Amazon to become the future of food and physical grocery retail.

Alibaba also with Ant Group has much more leverage in the future of fin-tech globally. Alibaba is destined to win at scale over Amazon while competing in a more competitive market with more innovative retailers such as JD, Pinduoduo and others.

China’s third-quarter GDP grew 4.9% as compared to a year ago, according to data released Monday by the country’s National Bureau of Statistics. Of course it's hard to trust Chinese data, but Alibaba's $3.6 Billion play on Sun Art isn't speculative. Alibaba's foray into grocery is much more substantial than Amazon's.

Alibaba Group will own 72% of Sun Art. Alibaba's "new retail" is much more transformative than Amazon's feeble impact on Grocery in the U.S. Amazon has much more competition and Alibaba has much more economic leverage.

Retail sales in China rose 3.3% in September from a year earlier, even as the Second Wave hits Europe, India, South America and North America. America's mitigation fatigue story is a sign of a country in decline.

 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.

Alibaba Appears Very Serious about the Future of Grocery Retail

Daniel Zhang, Chairman and Chief Executive Officer of Alibaba Group, said: “Alibaba’s strategic investment in Sun Art in 2017 was an important step in our New Retail strategy. The alliance we formed with Auchan Retail and Ruentex was instrumental in building a robust infrastructure to create opportunities and value in China’s retail sector.

The e-commerce giant is hoping to further leverage its digital presence to support Sun Art's 481 hypermarkets and three mid-size supermarkets in China. The move comes as Alibaba steadily expands its presence in China's offline retail sector, as growth in traditional e-commerce slows. Alibaba's stock is around the $300 mark $BABA. If Amazon's stock is overvalued, Alibaba's stock is likely still considerably undervalued compared to what it will become.

TechCrunch reminds us that 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. However that new retail play is slowly becoming the future of retail. Alibaba is more retail-centric than Amazon is.

“New Retail” aims to blur the lines between online and offline commerce through steps like turning physical stores into 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.

No place does that better than China thanks to a trio of companies, Alibaba, JD.com and Pinduoduo. America simply doesn't have the amount of innovation or the level and numbers of consumers (the data) to compete.

As Covid-19 hospitalization grow in 37 states of the United States, X-mas is not going to be great for retail. Alaska, Iowa, Kentucky, Montana, Nebraska, Oklahoma, South Dakota, Utah, Wisconsin and West Virginia all hit record highs in the average of hospitalizations. The third peak or Second wave of cases is likely a lot worse than whatever China is having to contend with, and who really knows what that is.

Sun Art is about 9.50 HKD on the Hong Kong stock exchange. 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 delivery app and logistics businesses. This means Alibaba has succeeded in food and grocery where Amazon has failed with its expensive Whole Foods acquisition.

As Alibaba increases its stake to a majority, Sun Art’s financial statements will be consolidated into the larger company’s. Alibaba has expanded outlets across China for Freshippo, a supermarket chain that doubles as an online delivery service. Alibaba operates 214 Freshippo outlets as of its most recent earnings report. JD.com is also doing very well in brick-and-mortar retail. JD itself has a similar alliances with supermarket group Yonghui and Walmart.

The deal signals the intention of Asia’s most valuable corporation to accelerate an effort to dominate one of Chinese e-commerce’s largest untapped frontiers. Alibaba's Ant Group Alipay payments method is likely to be pushed forwards with China's digital yuan later in 2021.

The Chinese e-commerce giant is now grappling with intensifying competition from the likes of JD, food delivery giant Meituan Dianping and startups such as Tencent Holdings Ltd.-backed Missfresh, all chasing a market for groceries and fresh produce that HSBC expects to grow 2.5 times to 690 billion yuan ($103 billion) by 2022 from 2019. 

Alibaba’s $3.6 billion investment to raise its stake in Sun Art to 72% from the 36% acquired in 2017 signals the company’s intention to strategically ramp up its supermarket retail services. Alibaba's new retail is much more speed focused than Walmart or Amazon delivery.

You want to talk about digital transformation? The online groceries segment has leapt to the forefront during Covid-19 when shoppers shunned restaurants and physical stores. In the U.S. they talk about same-day delivery, in China they talk about one-hour delivery. In 2020, Alibaba has made serious strides in social commerce with E-commerce livestreaming hitting the mainstream.

While Amazon disrupts small businesses due to the economic shutdowns of the pandemic, Alibaba's business model supports small and medium sized businesses.

While Amazon purges legacy competition in advertising and Alexa's AI capabilities, Alibaba is uniting China's entry into the Cloud, entertainment and new levels of convenience for consumers. It's really interesting to compare the two Behemoths because the cold tech wars really comes down to them.

While Amazon will disrupt Google in search and is the most likely western tech company to simultaneously disrupt healthcare and banking, Alibaba has already changed the world in Fin-Tech (via Ant Group), E-commerce, venture capital and how integrated Chinese services are. While Amazon is the most likely retailer to disrupt trucking, logistics and self-driving robotic fulfillment (in America), JD and Alibaba are already doing it in China.