China’s largest online retailer Alibaba Group, is looking to deepen its integration with bricks and mortar stores as it leads the bid to buy out department store chain Intime Retail Group for as much as $US2.6 billion.
The deal to buy Intime shows that Alibaba is pursuing growth beyond online retail and is looking to advance its physical footprint. If it manages to secure the deal, control of Intime would allow the e-commerce giant to explore ways to modernise China’s $US4.5 trillion industry, which has adapted well to the growing popularity of online shopping.
The company has also recently invested in a number of physical retail chains, including Haier Electronics Group and Suning Commerce Group Co. Founder of Alibaba (and executive chairman) Jack Ma’s goal is to debloat the Chinese retail landscape by cutting out layers of middlemen to improve costs and efficiency, and let stores buy directly from suppliers based on real-time inventory and demand.
“This deal shows that there is still value to brick-and-mortar stores, enough to interest e-commerce players,” said Singapore-based analyst at Bloomberg Intelligence, Catherine Lim. “What it’s shown is that department store chains are still relevant and of value. We could be seeing renewal of a sunset industry.”
Chinese department stores have struggled recently with consumers migrating to online bazaars due to frustration with lacklustre and poorly managed shopping malls. Unlike the US, where retail is dominated by a few mega-chains, China’s retail experience is much more inconsistent and fragmented.
China’s Intime operates 29 department stores and 17 shopping malls across the country, predominantly in its first and second tier cities. In August 2016, the firm posted a 21.3 percent decrease in half year profits, attributed to declining sales, with the company saying that e-commerce has transformed the competitive landscape of retail.
Alibaba is aggressive in its approach to making deals, recently announcing 35 deals over the past 12 months, totalling $US15.2 billion, according to Bloomberg.
On another note, Jack Ma recently met with US President-elect Donald Trump on Monday, to lay out Alibaba’s plans to bring a million small US businesses onto its e-commerce platform over the next five years, to sell to Chinese consumers.
Alibaba Group Holding Limited is a Chinese e-commerce company that provides consumer-to-consumer, business-to-consumer and business-to-business sales services via web portals. It also provides electronic payment services, a shopping search engine and data-centric cloud computing services. The group began in 1999 when Jack Ma founded the website Alibaba.com, a business-to-business portal to connect Chinese manufacturers with overseas buyers.