China’s Alibaba Group Holding has announced a strategic alliance with the Bailian Group — China’s largest retailer by store numbers — to join the e-commerce giant’s drive to use big data to improve and profit from brick-and-mortar sales.
The deal does not include any direct financial investment in Bailian — and represents yet another move on Alibaba’s part to grab up an ever-growing segment of the Chinese retail market (particularly as online sales are starting to slow some). This latest deal goes along with $4.6 billion on a minority stake in appliances retailer Suning Commerce Group Co Ltd and a $2.6 billion bid to take department store and shopping mall operator Intime Retail Group Co Ltd private. Alibaba has also bought a stake in grocery chain Sanjiang Shopping Club Co Ltd.
The news has been popular with investors thus far — shares bounced up and hard — though analysts have warned that it could take years before the returns from big data use can really be seen or felt in either chain’s earnings and revenue.
“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’ first area of collaboration will be supply chain technology using Alibaba’s big data capabilities. The partnership will also see Alipay payments integrated with Bailian Group’s existing membership program.
Bailian operates 4,700 outlets in 200 cities — roughly double the number of stores owned by Suning, Intime and Sanjiang combined. Supermarkets, convenience stores and pharmacies all fall under the Bailian wheelhouse.
Alibaba has an active user base of around 500 million and aims to tap the entirely of China’s $4.8 trillion retail economy with the power of its data management tools.
Growth in China’s e-commerce market is expected to average around 18 percent annually until 2020, which sounds fairly impressive — until one remembers that the average rate of growth has actually been 35 percent during the preceding four years.