"Sun Art is known for its innovative ideas; under its brand 'Auchan Minute", the group operates unmanned retail stores in China.
It is the latest in a string of strategic moves by Alibaba as the e-commerce company continues to roll out its "new retail" vision, both within China and overseas.
Reuters noted that Alibaba has invested upwards of US$9.3 billion in brick-and-mortar stores in recent years.
Taobao China Holding, a subsidiary of Alibaba, has agreed to buy a direct 26 per cent stake from Kofu and Concord Greater China for HK$16.1 billion, at HK$6.5 a share, while it will also buy a 19.9 per cent stake in Auchan Retail, which owns 51 per cent of Sun Art, for HK$6.3 billion, also at HK$6.5 per share, according to an exchange filing by Sun Art.
Apart from 20 Hema supermarkets in China, Alibaba also has a strategic partnership with China's largest supermarket operator Bailian Group and a stake in Bailian Group's largest chain Lianhua Supermarket, notes The Drum. The deal will make Alibaba, the second largest stakeholder in Sun Art after Auchan, which is also raising its stake to 36.18%. "Alibaba is excited to join with our new partners to redefine traditional retail through digital transformation", Daniel Zhang, its chief executive, said in the statement.
The focus of the deal is offering a bridge between offline and online commerce, both for retailers themselves and users. Notably, offline retail now constitutes 85% of total retail sales in China despite the enormous growth of e-commerce over the last few years.
"By fully integrating online and physical channels together with our partners, we look forward to delivering an original and delightful shopping experience to Chinese consumers", he added.
It's early days in Alibaba's grand experiment, but if it works, it could deepen a lead over Bezos' Amazon in the fragmented world of physical retail.
Sun Art is China's grocery store leader with about 8.2 percent of the market, according to data from Kantar Worldpanel.
However, shares in Sun Art Retail took a dive by almost 13.6% in Hong Kong trading on the morning of November 20.
"The acquisition by Alibaba is part of its investment diversification", said Andy Kwan, a Hong Kong-based director at ACE Centre for Business and Economic Research.
Sun Art Retail Group Ltd. was going through a lean patch, its sales went down as Chinese shoppers prefer to go online to buy high-end products.