New | China’s internet giants investing in offline retail for growth
Firms adopt an online-offline partnership strategy to combat soft retail spending
Alibaba’s purchase of certain media properties has dominated recent headlines, but China’s acquisition-hungry internet giants have moved on plenty of other targets lately, including brick-and-mortar retailers as they expand their commercial ecosystems.
The triumvirate of Baidu, Alibaba and Tencent has made US$75 billion of investments in strategic partners since 2013, according to HSBC data, and analysts say China’s internet behemoths have the cash to keep on going.
“[Mergers and acquisitions] will remain a main feature of China’s internet industry in 2016. We expect Alibaba’s and Tencent’s M&A spend to remain high,” wrote Fitch analyst Kelvin Ho in a recent note.
The internet firms aren’t just gobbling up other online players. Some US$47 billion has been spent on physical retailers and another US$797 million on logistic providers. Analysts say this reflects the broad adoption of an online-to-offline, or “O2O”, strategy.
“O2O has become the new growth driver for internet companies, especially e-commerce companies, which have been making efforts to broaden their services and product offerings and to enhance shopping experiences for online shoppers,” HSBC analysts wrote in a report last month.
