French retailer Carrefour recently announced a preliminary deal with Chinese internet juggernaut Tencent and Yonghui, a local retailer specializes in fresh good, regarding a potential investment in Carrefour’s China business, without giving financial details.
Carrefour and Tencent would also enter into a strategic cooperation which would see the two joining efforts on a variety of areas like “data, smart retail, mobile payment, in-store experience and data analysis to boost Carrefour China’s customer traffic,” according to a release put out by the French company, which is struggling in China.
Carrefour, the world’s second-largest retailer by revenues, entered China in 1995, will remain the largest shareholder of the China unit.
China’s new retail experiment
The deal came as China’s local giants, such as Alibaba, JD, and Yonghui, are pushing to forge alliances with the other side and marry their respective technology and retail expertise to transform the traditional retailing sector in a new trend dubbed “new retail”.
Thanks to Alibaba’s series of major investments in offline chain store operators and department stores, which brought much attention to the trend in the Middle Kingdom, 2017 has been hailed as the beginning of an era of new retail.
The largest Chinese e-commerce company has struck a similar deal with Auchan Retail S.A. and Ruentex Group in an alliance that would bring together the trio’s online and offline expertise to explore new retail opportunities in China’s food retail sector.
The deal would help Alibaba move closer to China’s lucrative US$ 500 billion food retail market, an area online store operators have been scratching their heads to get in.
As part of the deal, Hangzhou-based Alibaba would spend approx. US$2.88 to buy around 36 percent of Ruentex’s Sun Art, the largest grocery retailer in China, which operates 446 hypermarkets under the RT-Mart (大润发) and Auchan (欧尚) banners across the country, as well as superstores and innovative unmanned stores branded “Auchan Minute.”
This adds to Alibaba’s accumulated north of US$ 10 billion bets it made on a slew of big-box retailers including Suning, Lianhua, Sanjiang, and InTime, giving Alibaba a wider access to offline stores that could work together with it to attract customers and boost sales by utilizing the e-commerce powerhouse’s Internet-based technologies.
Alibaba also owns Hema Xiansheng (盒马鲜生), a post child of Chinese new retail movement.
Founded in 2015, Hema adopted some state-of-art technological innovations and business models – mobile payment only and cashier-less checkout, 30 min or less offline delivery of online orders, etc – that earned it the name of “a new retail species” that caters to its customers’ lifestyle.
A latecomer and a struggling giant
Tencent is a latecomer to the Chinese new retail trend, and Carrefour is a struggling giant in China’s declining offline retail market.
Currently operating 260 plus chain stores (supermarkets and convenience stores) in China, Carrefour has been tumbling in the face of declining sales, fierce local competition, and a buoyant online market.
A statement by the French company yesterday said it’s looking to slash off 2,400 jobs as part of an overhaul plan to revive its growth.
As Alibaba’s earliest physical channel investment traces back to its InTime deal in 2014, Tencent has shied from a similar move until its US$ 636 million acquisition of 5 percent stake in Yonghui last December, preceding the Carrefour cooperation.
That being said, Tencent has been exploring leveraging on its WeChat superapp’s ubiquity to cut a piece of pie from the offline retail market. By joining forces with Yonghui, Tencent hopes to replicate the Alibaba plus offline stores combination and to test water its own new retail experiments.
Yonghui, the fourth largest hypermarket chain by market share, is very experimental in piloting new retail idea. It launched a new sort of physical store coined “Super Species” last year, a hybrid of “high-end supermarket + fresh food restaurant through both physical and digital channels.”
Though coming late to the arena, Tencent’s recent two moves – investments in Yonghui and then Carrefour China – serves as a strong testament to the Shenzhen tech behemoth’s determination in upping the competition with its archrival Alibaba.
Backup Choice
While some of the largest local physical channels chose to side with Alibaba, Tencent, on the other hand, seems now has partnered with both Carrefour and Walmart China indirectly through JD, one of its investees.
JD acquired YHD, an online supermarket, from Walmart China in 2016 in a deal that saw the two joining hands and collaborating on ramping up their customer base.
However, Tencent might not be Carrefour’s first choice, according to a recent local media report, which says that Carrefour had been in talks with Alibaba of a deal to sell its China business as a whole to the latter. This preceded the Alibaba Auchan alliance.
As the sale deal flopped on price terms, Alibaba walked away to court Auchan, while Carrefour eventually comes together with Tencent.