A Kroger-Alibaba deal could thwart Amazon’s Whole Foods ambitions

  • Kroger is in talks with Alibaba about a potential partnership, a source with knowledge of the situation told Business Insider.
  • Alibaba could be lobbying to get Kroger to accept Alipay, its online payment system.
  • Kroger could also be consulting with Alibaba about ways it can market and sell its products to Chinese consumers.
  • An outright acquisition would give Alibaba a physical-store footprint in the US that’s about six times the size of Amazon’s.

Alibaba could overtake Amazon’s push into retail stores in one move.

The Chinese e-commerce giant is in talks with the supermarket chain Kroger about a potential partnership, a person with knowledge of the situation confirmed to Business Insider. This could take many forms:

  • Alibaba could be lobbying to get Kroger to accept Alipay, its online payment system. That would give Chinese tourists who are shopping in the US an easy way to check out at the nation’s largest grocer.
  • Kroger could also be consulting with Alibaba about ways it can market and sell its products to Chinese consumers, like the warehouse chain Costco did in 2014.
  • Alibaba could outright acquire Kroger, which would give Alibaba access to the grocer’s nearly 2,800 stores in the US.

A press release issued by the Chinese government last week and first noticed by the New York Post said Kroger and Alibaba were already working together.

“Alibaba has teamed up with Kroger, Yintai, and RT-Mart to speed up the integration of online and offline sales,” says the release on comments from an official with China’s Ministry of Commerce.

The Post was also the first to report on the companies’ discussions about forming an alliance.

An Alibaba spokesman said: “Alibaba has dialogue with hundreds of businesses around the world every day about expanding commercial relationships and reaching Chinese consumers, and Kroger is an example of just that.”

Kroger declined to comment.

Amazon shook up the grocery industry last year when it purchased Whole Foods for $13.7 billion. The deal represented Amazon’s biggest commitment yet to physical retail, as the purchase included Whole Foods’ nearly 500 stores.

A deal with Kroger could give Alibaba access to Kroger’s nearly 2,800 US stores, the country’s biggest network of traditional grocery stores, creating a physical-store footprint about six times the size of Amazon’s.

‘Kryptonite to Amazon Whole Foods and Walmart/Jet.com’

Kroger says it plans to add digital-shelf technology to nearly 200 stores this year.

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Kroger says it plans to add digital-shelf technology to nearly 200 stores this year.
source
Kroger

Brittain Ladd, a Kroger consultant, wrote about the possibility of a Kroger-Alibaba partnership in a LinkedIn post published in June.

“I believe Alibaba should acquire Kroger as a way to enter the USA, as well as extend and complement their global retail ecosystem,” he wrote. “A combined Kroger and Alibaba would prove to be Kryptonite to Amazon Whole Foods and Walmart/Jet.com, while adding substantial value to Kroger customers.”

In the LinkedIn post, Ladd suggested that Kroger could license Alipay or launch Alibaba’s Hema supermarkets in the US. Hema markets are similar to Amazon’s cashier-less Amazon Go stores.

Kroger has been working on adding more digital features to its stores. The grocery chain is rolling out a new service called Scan, Bag, Go to 400 stores. It’s designed to enable shoppers to scan their groceries with mobile phones or other handheld devices while they shop.

Eventually, Kroger says, the technology will also allow customers to pay for the items with their phones – which is where Alipay could come in.

Kroger says it also plans to add digital-shelf technology to nearly 200 stores this year. The technology, called Kroger Edge, is designed to replace paper price tags with digital displays showing a product’s price and nutritional information, as well as video ads and coupons.