To become a multifaceted global powerhouse like Amazon (AMZN) - Get Amazon.com, Inc. Report , Chinese e-commerce giant Alibaba (BABA) - Get Alibaba Group Holding Ltd. Sponsored ADR Report is increasingly moving beyond its core e-commerce business to search for new avenues of growth.
Over the weekend, Alibaba announced it had formed a strategic partnership with Shanghai Bailian Group, one of China's largest supermarket and department store chains, in order to deepen its so-called "New Retail" strategy. And on Tuesday,Alibaba's finance arm, Ant Financial, announced a $200 million investment in South Korea's dominant messaging app Kakao Talk.
Of the retail deal with Bailian, Alibaba said it plans to employ technologies such as artificial intelligence, Internet of Things, and big data to help some of Shanghai Bailian Group's 4,700 outlets to achieve better integration between their offline stores, merchandise, logistics and payment tools.
The collaboration is far from Alibaba's first foray into online-to-offline retail, which the company calls "New Retail" to describe a future where the distinction between physical and virtual commerce becomes obsolete.
In January, Alibaba struck its largest retail deal to-date with Beijing-based department store chain Intime Retail Group, taking it private for as much as $2.6 billion. Apart from Intime, Alibaba has also spent $4.6 billion for a minority stake in Chinese electronic appliances retailer Suning Commerce Group, and $305 million in supermarket chain Sanjiang Shopping Club.
"New retail reimagines the relationship between consumers, merchandise and retail space by leveraging mobile Internet and big data. It will upend the traditional manufacturing and supply chain, the connection between merchant and consumer, as well as the overall consumer experience," said Daniel Zhang, CEO of Alibaba in a statement. "Businesses will increasingly embrace big data and new innovations to better identify, reach, analyze and serve their customers, and their digital transformation will be empowered by Alibaba's ecosystem."
While Alibaba has been busy building up its retail presence at home, Ant Financial, its highly-valued finance arm, has accelerated its overseas spending with a new investment in South Korea's Kakao Pay, which will soon launch as a subsidiary of messaging app KakaoTalk to allow users to make payments for their online purchases.
First launched in 2010, Kakao Talk is the most popular and ubiquitous chatting app in South Korea, a country with an 88 percent smartphone penetration rate. Kakao currently claims to have 48 million plus users while Ant Financial boasts over 450 million users worldwide.
"They [Alibaba] need to plant seeds all over the place because you never know where the next opportunity is going to be. And instant messaging is becoming a way to do e-commerce; it's also a way of facilitating business," said Ivan Feinseth, Director of Research at Tigress Financial Partners who covers Alibaba.
Feinseth believes that it is important for Ant Financial, which operates Alibaba's popular e-payment platform Alipay, to get into chat-based payment systems. Experts believe that users will eventually leave standalone mobile payment applications for more integrated, multi-functional payment platforms.
Feinseth said that Alibaba cannot afford to miss this big opportunity, given that Facebook (FB) - Get Facebook, Inc. Class A Report has partnered with PayPal (PYPL) - Get PayPal Holdings Inc Report , Visa (V) - Get Visa Inc. Class A Report , Mastercard (MA) - Get Mastercard Inc. (MA) Report and American Express (AXP) - Get American Express Company Report , among others, to offer money transfer and mobile purchase services.
Ant Financial's investment in Kakao signals the acceleration of Alibaba's ongoing global expansion plan. The Kakao deal comes just four days after the company completed its fist investment in the Philippines. Ant Financial said on Feb. 17 that it made an undisclosed investment in Mynt, a financial venture from Philippine mobile operator Globe Telecom.
Already this year, Ant Financial has spent $880 million to acquire Dallas-based money transfer company MoneyGram International (MGI) - Get MoneyGram International, Inc. Report . The company also invested $680 million in Indian e-commerce and payments player Paytm in Sept. 2015 and on a 20 percent stake in Thailand's Ascend Money, an e-payment services and micro-loans provider in Nov. 2016.
Shares of Alibaba rose 1.6% to $102.23 in trading on Tuesday.