Alibaba has agreed to pay $692 million for a 35% stake in Intime Retail, which operates department stores throughout China. The two companies will form a joint initiative to focus on offline-to-online retail opportunities.
The deal is the latest flurry of M&A and investment activity among China’s top Internet companies, including Alibaba, Tencent, and Baidu, which was triggered in part by Alibaba’s highly anticipated initial public offering in New York City.
Alibaba and Intime said in a press statement that they will develop online-to-offline (O2O) initiatives in order to “provide a more convenient shopping experience.” This means that Alibaba and Intime will look for ways to combine Alibaba’s e-commerce platforms with Intime’s retail outlets, which consist of high-end department stores, shopping malls, and online marketplace Yintai.com. The two companies previously partnered on O2O projects for promotional events in November 2013 and earlier this year.
Alibaba’s Tmall.com, which hosts online stores for major brands, will have access to Intime’s inventory of offline products. This will “enable a broader product selection of international brands as well as fulfillment of online orders from Intime’s physical stores.”
Intime’s shoppers will also be able to receive targeted promotions through location-based technology while in-store, as well as use virtual pre-paid cards through Alibaba’s mobile wallet service Alipay.
The deal with Intime and focus on Tmall is significant because the site is not only one of Alibaba’s most valuable properties, but also still has significant growth potential, particularly if Alibaba raises its sales commissions.
“We see significant opportunities to extend our e-commerce platform to physical retail, developing a more engaging, omnichannel and digitally-connected shopping experience,” said Daniel Zhang, COO of Alibaba Group, in a statement.