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Alibaba Group Holding has increased its stake in Sun Art Retail Group, a Hypermarket chain operator.
As detailed by Reuters, the move by Alibaba Group Holding Ltd (HKG: 9988) to increase its investment in the Sun Art Retail Group Ltd (HKG: 6808) comes in a bid to bolster its presence in the Chinese retail market sector.
Per the reports, the investment was made directly into A-RT Retail Holders, the retail giant with about 51% controlling stake in Sun Art Group. Alibaba increased its stake in A-RT Retail Holdings from 21% to 72% which gives it a huge controlling power, a privilege that is worth about US$3.6 billion.
“As the COVID-19 pandemic is accelerating the digitalization 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,” Alibaba Chairman and Chief Executive Officer Daniel Zhang said in a statement.
The power of large corporations such as that of the Alibaba group consists of the targeted drive to continue to take a controlling stake in the market share, even though acquisitions are the viable means to achieve this end. With the Alibaba Group’s controlling stake in the Sun Art Retail Group, the company will be better positioned to compete amidst the country surging retail consumption and growth.
The current Chief Executive Officer of the Sun Art Retail Group Peter Huang will also be appointed as the group’s Chairman according to the reports. Shares of Alibaba Group, following the announcement, is up 1.09% at HKD297.20 while the shares of the Sun Art Group soared 19.17% at the time of writing.
Alibaba and Sun Art Group May Create a Formidable Outfit
The Chinese market is a large one and the more the number of retail outlets competing e-commerce outfits can churn out, the better the competitive advantage they are likely to get. The bolstered partnership of the Alibaba Group and Sun Art Retail Group has the potential of solidifying the duo’s presence in the country of about 1.4 billion citizens.
Sun Art currently runs about 481 hypermarkets with three mid-sized supermarkets as Reuters pointed out, this number will consolidate Alibaba’s outfits including its online marketplace. Potential competitors include JD.com Inc (HKG: 9618) as well as Pinduoduo Inc (NASDAQ: PDD) both of whom already have a considerable level of market penetration.
The move to solidify its position has also stirred the establishment of a Joint Venture between Alibaba Group and Dufry AG (SWX: DUFN), a Switzerland based online travel retailer. The Joint Venture seeks to help both companies leverage each other’s customer network, operational efficiencies as well as technological advances.
Besides the hope of revenue from its e-commerce outfits, Alibaba also aims to take profits in its relatively new business units including its Cloud Division as early as 2021.