On November 20, Alibaba announced that it would acquire Gaoxin Retail equity for HK$22.4 billion, with a direct and indirect holdings of 36.16%. Gao Xin Retail is the largest supermarket operator in China, with two major brands: Auchan and RT-Mart . The acquisition of Gao Xin Retail should serve Alibaba's new retail strategy. Perhaps, it is also related to the development of Tmall Supermarket , which is not as expected.
On November 20, 2017, Alibaba Group announced a cooperation with Auchan Retail and Runtai Group . According to the strategic agreement, Alibaba invested HK$22.4 billion (approximately US$2.88 billion) to acquire Gaoxin Retail shares from Runtai Group. After the transaction is completed, Alibaba directly and indirectly holds 36.16% of Gaoxin Retail shares.
Gao Xin Retail is the largest supermarket store operator in the country. It owns two major supermarket brands, "Aushang" and "RT-Mart", and operates 446 hypermarkets nationwide. In 2016, its revenue exceeded 100 billion yuan, and its market share remained the largest in the domestic retail industry for many years.
In the past year, Alibaba has been focusing on developing new retail, including investing in Sanjiang Shopping , and cooperating with Shanghai Bailian. Some industry insiders believe that Alibaba's investment in Sanjiang Shopping is an internal product test, and its cooperation with Shanghai Bailian is an open product test, and its joining hands with Gao Xin Retail announced that the product has officially launched.
It is worth noting that new retail has set off a trend of speculation in A-shares. After Alibaba acquired a stake in Sanjiang Shopping last year, the stocks of listed companies have hit the daily limit for 14 consecutive trading days. However, after the news of Alibaba's shareholding was announced, Gao Xin Retail's stock price rose first and then fell today, and finally closed at HK$8.25, down 4.07%.
Gao Xin Retail's share price may be related to Alibaba's discount acquisition, with the acquisition price of HK$6.5, a discount of 24.42% from the closing price of HK$8.60 before the suspension.
22.4 billion acquisition of Gao Xin Retail
Gao Xin Retail may be a strange name for many people, and RT-Mart is widely known. RT-Mart was founded by Yin Yanliang, president of Runtai Group. It is a Taiwanese company. In 1997, RT-Mart entered the mainland for the first time and opened its first store in Shanghai. In 2001, in order to better carry out international chain operations, RT-Mart introduced France Auchan Group to become a joint venture. In 2011, the two parties packaged their mainland stores into a Hong Kong holding company and listed them on the Hong Kong stock market, which is Gao Xin Retail.
According to the strategic agreement, Alibaba acquired 36.16% of Gaoxin Retail, while Auchan Retail’s indirect holdings of only 35.70% of Gaoxin Retail’s equity. Despite Alibaba's largest stake, control remains in the hands of Auchan Retail.
The acquisition is divided into two parts. First, the exchange of Runtai Group and Aushang Retail. Aushang Retail will exchange 9.71% of Gaoxin Retail's equity for the 19% of Jixin held by Runtai Group, and Jixin is the largest shareholder of Gaoxin Retail. After the stock exchange was completed, Auchan Retail held 70% of Jixin's equity, consolidating its controlling position.
Then Runtai Group sold 26% of Gao Xin Retail equity and 19.9% of Ji Xin equity to Alibaba for HK$22.4 billion.
As early as February 2017, there were rumors that Gao Xin Retail had privately negotiated with Alibaba to sell its RT-Mart brand. Interestingly, both parties to the transaction have different opinions on the acquisition rumors. Alibaba's attitude is relatively ambiguous. "Alibaba is undoubtedly actively exploring new retail. As for market rumors, we will not comment on it for the time being." And Gao Xin Retail's major shareholder Runtai Group is obviously waiting to be sold. Its president Yin Yanliang said that it is not only Alibaba that is negotiating, but three giants including Tencent and Suning .
At that time, the market joked, "The Chinese RT-Mart girl under Gao Xin is going to get married, and there are three suitors!" In fact, Gao Xin Retail does have the capital to ask for a price. Data shows that as of December 2016, Gao Xin Retail's share in the Chinese retail market was 7.8%, higher than the second place CR Vanguard 6.2%, third place Walmart and more than twice the fourth place Carrefour.
Perhaps, Runtai Group intends to sell RT-Mart, but it does not have an absolute controlling position.On February 20, Gao Xin Retail CEO made it clear at a performance press conference held on February 20 that "the company will not sell RT-Mart." This time, Alibaba's final acquisition of NT$100 million in Gaoxin Retail shows that the failure to sell RT-Mart should be due to the opposition of Auchan Group.
The red ocean of the new retail market?
As an e-commerce platform, the essence of Alibaba's business is traffic sales. It diverts traffic to Taobao and Tmall stores through multiple channels, and charges traffic fees through direct trains, diamond booths, etc. The current situation of in the Internet industry is that online traffic is extremely expensive, while offline traffic is relatively cheap. Therefore, Alibaba urgently needs to expand the offline market, and find cheaper traffic through the combination of online and offline.
Gao Xin Retail is the largest supermarket in China and has a large amount of offline traffic. In addition, when offline channels slowed down, and when large supermarkets such as Walmart set off a wave of store closures, RT-Mart expanded against the trend and maintained high-frequency opening of stores. In 2016, RT-Mart opened 31 new stores in China throughout the year, with a total of 365 stores.
has invested in Gaoxin Retail and relied on Alibaba's own technology to upgrade and transform the production, circulation and sales process of goods. In this way, there is an opportunity to reduce operating costs and comprehensively utilize online and offline traffic resources to maximize benefits.
marketing-good Jack Ma gave this behavior a nice name "new retail". In October 2016, Jack Ma mentioned new retail for the first time, "The era of pure e-commerce will end soon. In the next ten or twenty years, there is no such thing as e-commerce. Only new retail, that is, online and offline and logistics must be combined to create a true new retail."
Alibaba's investment in Gaoxin Retail not only focuses on seizing offline traffic, but also aims to expand the department store and fresh food market. is now on Taobao and Tmall, which basically includes shoes, hats, clothing and electronic products as the main sales categories, and is relatively lacking in department stores and fresh food markets.
For this reason, Alibaba launched Tmall Supermarket in 2012 and had high hopes for it. Alibaba Group CEO Zhang Yong once said that Tmall Supermarket is the fourth consumption platform alongside Taobao, Tmall and Juhuasuan.
Unfortunately, it has been developed for several years. Tmall supermarkets are not as good as their competitors in their business. They changed their coach twice in 2016. First, in July, Jiangpan, who was originally from Walmart China, replaced Jin Cheng as the general manager of Tmall Supermarket. However, in less than half a year, Jiangpan was transferred in December of that year, and the importance of Tmall supermarkets has gradually faded internally.
In fact, Tmall supermarkets do not adopt self-operated procurement. The products are provided by many small merchants, and the product inventory, transportation and quality cannot be effectively controlled. In contrast, in , JD.com, and No. 1, all of their products are self-operated and sold, and all are put into the warehouse, using their own logistics, and their corporate genes and supermarket categories are fully consistent.
It can be said that Alibaba's investment in Sanjiang Shopping, cooperation with Shanghai Bailian, and this investment in Gaoxin Retail are largely due to its own poor development of Tmall supermarkets and must rely on the power of offline channels.
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