Alibaba expands bricks-and-mortar retail push with Bailian deal
China’s Alibaba Group Holding said it formed a strategic partnership with Bailian Group, the largest retailer by store numbers to join the ecommerce giant’s drive to use big data to improve and profit from brick-and-mortar sales.
The deal, which does not include any financial investment in Bailian, is the latest in Alibaba’s still nascent efforts to capture a bigger share of the retail market as online sales growth slows.
It has also spent $4.6 billion on a minority stake in appliances retailer Suning Commerce Group, is leading a $2.6 billion bid to take department store and shopping mall operator Intime Retail Group private and has bought a stake in grocery chain Sanjiang Shopping Club.
News of the agreement sent shares in Bailian Group firms surging but analysts cautioned it may take several years before returns from using big data can make a significant difference to earnings. “There is a big push right now across brands to try and figure out how to mix physical and online shopping but gains so far have been limited,” said Shanghai-based retail analyst Ben Cavender at China Market Research Group.
The two firms will initially cooperate on supply chain technology using Alibaba’s big data capabilities and will integrate Alipay payments with Bailian Group’s existing membership programme.
Bailian operates 4,700 outlets in 200 cities including supermarkets, convenience stores and pharmacies — more than double the stores owned by Suning, Intime and Sanjiang combined. An Alibaba spokesman declined to comment on how many stores will be involved in the new partnership. A Bailian spokesman did not respond to a request for comment.
Alibaba, which has an active user base of around 500 million, has said it wants to tap China’s entire $4.8 trillion retail economy by developing data-driven management tools for retailers and brands.
China’s e-commerce market is expected to average around 18 per cent annually until 2020, according to consultancy Bain & Company, compared with an average rate of 35 per cent during the preceding four years. And while ecommerce has seen phenomenal growth in China, brick-and-mortar sales still accounted for 84 per cent of total retail sales in China last year, Bain said.
Among Bailian Group firms, shares in Shanghai Bailian Group were up by the 10 per cent daily limit in afternoon trade. Lianhua Supermarket Holdings rose seven per cent and Shanghai Material Trading climbed five per cent. REUTERS