Kroger, U.S.’s 2nd largest food retailer, is reportedly in talks with Chinese e-commerce behemoth Alibaba with potential initiatives in the pipeline to help the American company counter Amazon Go, according to a New York Post coverage.
Rumor has it that senior executives at Kroger have visited Alibaba in China last month for the potential alliance. If the duo finally reaches a deal, the Cincinnati-headquartered company is likely to adopt Alibaba’s Alipay in its stores and access to Chinese customers through Alibaba’s e-commerce website Tmall. Costco, another major U.S. wholesale retailer, has tested the water for Kroger by opening its first Tmall store back in 2014 and a flagship store in last September.
The deal would extend a run of traditional retailers teaming up with tech-enabled online merchants in the past years. In June 2017, Amazon acquired Whole Foods for $13.7 billion and following the deal, Kroger’s market share plummet by 26%. Amazon Go, a significant push into the staff-less era and if in the Chinese context, the new retail trend, would challenge more traditional retailers like Kroger even more.
The potential Kroger-Alibaba alliance comes as part of Kroger’s plan to maintain its position in the market. The company has attempted to embrace technologies and improve customer experience. It made its first venture into mobile payment by adopting JPMorgan Chase & Co’s Chase Pay mobile wallet, announced the company last November. The supermarket chain has also teamed up with grocery delivery company Instacart to provide home delivery service and is said to consider itself as a potential buyer of Boxed.com, an online retailer that targets millennials, and the online retailer Overstock.com.
As for the Chinese tech giant, the deal would beef up its relatively weak presence in the U.S. market compared to its dominant status in China. The U.S. mobile payment transaction value is projected to keep growing and reach USD 189.97 billion by 2021. But the market is relatively untapped as the most popular mobile wallet Apple Pay approximately holds a mere adoption rate of 5.7% after almost three years since its launch. In contrast, China has reportedly 560 million digital payment users, accounting for almost 40% of the country’s population.
It’s also worth noting that the Chinese e-commerce giant itself has a strong foothold in the retail sector. Its Hema Xiansheng, a combination of restaurant and supermarket, is an example of Jack Ma’s new retail strategy, which has already brought a turmoil to supermarket chains in China.
Will Kroger come up with a Hema Xiansheng-like super store? If it happens, seeing how it would compete with Amazon Go would be extremely interesting.