As Walmart continues to set itself up to compete with Alibaba on its home turf of China both online and offline, the e-Commerce giant has taken a big step into the physical world. Alibaba has made a $2.6 billion offer to fully acquire Intime and take the department store and mall operator private.
Intime operates 29 department stores and 17 shopping malls across urban China. Under the proposed deal, Alibaba would take a controlling stake in Intime, holding an estimated 74% share. Alibaba bought a stake in the firm for $692 million nearly three years ago, but now it is bidding to buy it outright and delist it from the Hong Kong stock exchange. The funds would be raised through internal cash and external debt financing.
“Our combination with Intime will enable us to tap into the long-term growth potential of a new form of retail in China powered by Internet technology and data,” said Daniel Zhang, CEO of Alibaba Group in a statement.
“We don’t divide the world into real or virtual economies, only the old and the new,” Zhang added. “Those who cling on to the old ways of retailing will be disrupted, and brick-and-mortar businesses will be able to create value for consumers if they are integrated with the power of mobile reach, real-time consumer insights, and technology capability to improve operating efficiency.”
Chinese consumers increasingly use their mobile phones to shop, a trend that Alibaba says can help conventional retailers create a new shopping paradigm while improving operating efficiency. For the quarter that ended in September 2016, 78% of the gross merchandise volume on Alibaba’s China retail marketplaces was generated from mobile, and mobile monthly active users reached 450 million in September.
The move to mobile has opened up opportunities to enhance the brick-and-mortar shopping experience as well. For example, during Alibaba’s giant 11.11 Global Shopping Festival in November, the company launched a Pokémon Go-like augmented reality mobile game to drive traffic to real-world retailers, including Intime shopping malls.
In a 2015 deal, Alibaba invested $4.6 billion to buy 20% of retail giant Sunning and its 1,600 locations. Walmart opened its first store in China back in 1996, but the retailer currently operates only 430 locations throughout the country.