Dive Brief:
- Kroger executives met with officials from online retailer Alibaba last month in China, according to The New York Post and Reuters, citing multiple anonymous sources as well as Chinese reports. According to a Chinese government press release quoted by the Post, "Alibaba has teamed up with Kroger … to speed up the integration of online and off-line sales."
- In an email to Food Dive, Diana Sheehan, director of retail insights with Kantar Retail, said, "This would give Kroger access to sophisticated technology – some that may be more powerful than what Amazon has – while Alibaba wins by learning more about the bricks and mortar world and the US market." Alibaba recently invested $2.8 billion for a 36% stake in Sun Art Retail Group, often called the Walmart of China, and owns a chain of 13 Hema supermarkets that combine digital and physical retail.
- Sources also speculated that Kroger could be interested in Alibaba's payment app, Alipay, which shoppers use for purchases online and in stores like Hema.
Dive Insight:
Another week, another rumored Kroger tie-up. And this one could potentially be the biggest yet.
Alibaba is the Chinese equivalent of Amazon, but even larger — an online retailing giant that possesses massive amounts of capital and industry-leading technology. Having ridden the country's recent middle-class boom — China is the world's fastest growing e-commerce market, with an estimated 15% of sales currently happening online — Alibaba has expanded abroad and is looking to make inroads in the U.S. market.
Alibaba, like Amazon, is also investing heavily in brick-and-mortar stores, including supermarkets. In November, the e-tailer sunk $2.9 billion into Sun Art Retail Group, which operates 450 massive "hypermarkets" across the country. The deal is part of Alibaba's push to claim more of China's $1.2 trillion grocery market. It's also part of the company's "New Retail" initiative, which seeks to combine its internet-based tech approach with physical outlets in hopes of creating a seamless consumer experience.
In 2015, Alibaba established Hema, a grocery chain that exemplifies this seamless blend of physical and digital retailing. Customers shop by scanning bar codes next to each product, and can take their purchases home with them when they're done, have them delivered — or, in some cases, have them prepared fresh in-store. The chain relies on Alipay, Alibaba's mobile app, for payments, product information and shopper data collection.
Hema currently has 13 locations in China, and announced earlier this month it would add an additional 30 in Beijing.
Kroger, whose stock got hammered following Amazon's acquisition of Whole Foods, desperately wants to prove investors' fears wrong. And incorporating cutting-edge store technology akin to what Hema offers would be one way to do this.
Kroger has its "Scan, Bag, Go" cashier-free shopping app, and it's rolling out digital shelf technology to 200 stores this year. Both initiatives indicate Kroger's eagerness to make its store experience faster and simpler, and to combine digital with physical retailing. Alibaba's technology could help the grocer boost its mobile payment innovation, develop innovative ways to fulfill orders, and other improvements that could counter anything Amazon has up its sleeve.
The company, which is the largest conventional grocer in the U.S., has improved its outlook lately thanks to its "Restock Kroger" plan, but it likely needs a transformative acquisition or partnership if it wants to go toe-to-toe with Amazon and Walmart. The Alibaba link, as well as recent reports tying Kroger with Boxed, Overstock.com and Ace Hardware, indicate the grocer is searching for just that, and could make a big announcement this year.
"We know there has to be an acquisition or partnership in Kroger's future that allows it more effectively compete in e-commerce," Sheehan told Food Dive. "It is the fastest way to make a big jump in the tech learning curve to compete effectively."
