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Alibaba Moves Ahead with "New Retail", Buys Stake in Lianhua
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Alibaba Group Holding Limited (BABA - Free Report) made yet another effort to strengthen its presence in the brick-and-mortar space by buying an 18% stake in Lianhua Supermarket chain.
Lianhua is held by Bailian Group, a leading retail conglomerate in China, with which Alibaba entered into a strategic partnership recently. Lianhua has over 3,600 physical outlets across 19 provinces and municipalities.
Reportedly, Alibaba will pay $81 million for Lianhua shares that it will buy from Yiguo.com, a fresh food e-commerce platform that it backed through funding rounds in 2013 and 2016. The buyout will make the retail giant the second largest shareholder in Lianhua.
Is Alibaba Following Amazon?
Currently, Alibaba has been steering its business into the brick-and-mortar space in China, just like Amazon (AMZN - Free Report) in the U.S.
Last year, the company invested $4.6 billion in electronics retailer, Suning Commerce Group Co Ltd. The company has also partnered with Intime Retail Group Co Ltd founder, Shen Guojun, in a $2.6 billion bid to privatize Intime and has purchased a stake in grocery chain Sanjiang Shopping Club Co Ltd.
Investors will keep an eye on how Alibaba’s efforts in the physical retail space impact its share price that has appreciated 59.3% over the last one year compared with the Zacks Internet – Commerce industry’s gain of 45%.
Amazon entered into the brick-and-mortar space with books in 2016. It is treading the same path with other merchandise as well, targeting the considerably wide customer base that still prefers to shop at physical stores. Amazon Bookstore integrates the advantages of offline and online purchase.
The company’s first brick-and mortar grocery store branded Amazon Go is expected to open in Seattle and will offer a “check-out free” experience to customers.
Alibaba, which gives tough competition to Amazon, eBay (EBAY - Free Report) and JD.com (JD - Free Report) in China, has a broader goal of tapping China’s massive $4.8 trillion retail space that includes both online and offline forms. Notably, offline retail currently constitutes 84% of total retail sales in China despite the enormous growth of e-commerce over the last few years.
With this in mind, the company is working on the development of what it calls “New Retail” to bridge the gap between online and offline shopping using its big data capacity. It expects that the system will offer brick-and-mortar retailers new ways to evolve across marketing, inventory and distribution networks.
The concept, still at a nascent stage, won't move the needle much for Alibaba from a financial perspective. However, it makes sense as the company is seeing sluggish online sales. It appears that it is gearing up well in advance in case the online retail industry faces a slowdown.
Alibaba’s partnership with Bailian is a part of this “New Retail’ strategy. It plans to leverage on its big data capacities to explore new retail opportunities across outlet design, technology research and development, customer relationship management, supply chain management, payment and logistics. The acquisition of a minority stake in Bailian’s subsidiary reflects its focus on this strategy.
The Fusion of Online and Offline
We expect online retail sales to decelerate while the overall retail market still holds a lot of potential. This might be due to the fact that a large number of customers still prefer to shop offline and will continue to do so in the future.
That being said, Internet giants, especially Alibaba and Amazon’s strategy of gradually merging online and offline retail looks promising. It will not only reshape the retail landscape but also help them fend off competition, if they could manage a first mover advantage.
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Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Alibaba Moves Ahead with "New Retail", Buys Stake in Lianhua
Alibaba Group Holding Limited (BABA - Free Report) made yet another effort to strengthen its presence in the brick-and-mortar space by buying an 18% stake in Lianhua Supermarket chain.
Lianhua is held by Bailian Group, a leading retail conglomerate in China, with which Alibaba entered into a strategic partnership recently. Lianhua has over 3,600 physical outlets across 19 provinces and municipalities.
Reportedly, Alibaba will pay $81 million for Lianhua shares that it will buy from Yiguo.com, a fresh food e-commerce platform that it backed through funding rounds in 2013 and 2016. The buyout will make the retail giant the second largest shareholder in Lianhua.
Is Alibaba Following Amazon?
Currently, Alibaba has been steering its business into the brick-and-mortar space in China, just like Amazon (AMZN - Free Report) in the U.S.
Last year, the company invested $4.6 billion in electronics retailer, Suning Commerce Group Co Ltd. The company has also partnered with Intime Retail Group Co Ltd founder, Shen Guojun, in a $2.6 billion bid to privatize Intime and has purchased a stake in grocery chain Sanjiang Shopping Club Co Ltd.
Investors will keep an eye on how Alibaba’s efforts in the physical retail space impact its share price that has appreciated 59.3% over the last one year compared with the Zacks Internet – Commerce industry’s gain of 45%.
Amazon entered into the brick-and-mortar space with books in 2016. It is treading the same path with other merchandise as well, targeting the considerably wide customer base that still prefers to shop at physical stores. Amazon Bookstore integrates the advantages of offline and online purchase.
The company’s first brick-and mortar grocery store branded Amazon Go is expected to open in Seattle and will offer a “check-out free” experience to customers.
Alibaba Group Holding Limited Net Income (TTM)
Alibaba Group Holding Limited Net Income (TTM) | Alibaba Group Holding Limited Quote
“New Retail” to Get a Boost
Alibaba, which gives tough competition to Amazon, eBay (EBAY - Free Report) and JD.com (JD - Free Report) in China, has a broader goal of tapping China’s massive $4.8 trillion retail space that includes both online and offline forms. Notably, offline retail currently constitutes 84% of total retail sales in China despite the enormous growth of e-commerce over the last few years.
With this in mind, the company is working on the development of what it calls “New Retail” to bridge the gap between online and offline shopping using its big data capacity. It expects that the system will offer brick-and-mortar retailers new ways to evolve across marketing, inventory and distribution networks.
The concept, still at a nascent stage, won't move the needle much for Alibaba from a financial perspective. However, it makes sense as the company is seeing sluggish online sales. It appears that it is gearing up well in advance in case the online retail industry faces a slowdown.
Alibaba’s partnership with Bailian is a part of this “New Retail’ strategy. It plans to leverage on its big data capacities to explore new retail opportunities across outlet design, technology research and development, customer relationship management, supply chain management, payment and logistics. The acquisition of a minority stake in Bailian’s subsidiary reflects its focus on this strategy.
The Fusion of Online and Offline
We expect online retail sales to decelerate while the overall retail market still holds a lot of potential. This might be due to the fact that a large number of customers still prefer to shop offline and will continue to do so in the future.
That being said, Internet giants, especially Alibaba and Amazon’s strategy of gradually merging online and offline retail looks promising. It will not only reshape the retail landscape but also help them fend off competition, if they could manage a first mover advantage.
Alibaba shares currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>