Speculation Rises on Report Linking Kroger, Alibaba

Could the fast-converging worlds of digital and physical retail sparked by two gigantic deals involving multibillion dollar food retailers be joined by a third?

Alibaba Group, the Chinese e-commerce giant considered one of Amazon’s global rivals, has reportedly met with senior executives of  The Kroger Co., leading to speculation the companies could come—or have come—to some kind of business relationship, a development some interpreted as a potential response to the Walmart-Jet and Whole Foods-Amazon deals that have transformed the future of retail over the last 16 months.

Kroger spokeswoman Kristal Howard declined comment. An Alibaba representative, in a statement provided to WGB, 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.”

The Alibaba representative declined additional comment.

However, a press release earlier this month from the Shandong Province Department of Commerce reviewing recent retail developments in the province indicated “Alibaba has teamed up with Kroger and [Chinese retailers] Yintai and RT-Mart to speed up the integration of online and offline sales.” 

The Kroger-Alibaba discussion, first reported by the New York Post late Wednesday, sparked some observers to speculate a merger between them could be in the works, although there was no indication this was the case based on reported talks. The Post report, which cited multiple anonymous sources, indicated the meeting in China did not include the company’s respective CEOs.

Related:Kroger Considers C-Store Sale Amid 'Restock' Plan

A source cited in the Post article said a business relationship between the companies could also involve Kroger directing shoppers seeking general merchandise to Alibaba’s websites, such as Taobao and Tmall.

Alibaba, however, is also at the forefront of innovative developments in grocery retailing in China, including its Hema Xiansheng store that is both an online fulfillment center, capable of making 30-minute local deliveries, and a retail store. This idea “certainly sounds like it could be weaved into [Kroger’s] Project Restock,” Karen Short, an analyst at Barclays Capital, said in a research note published Thursday.

Kroger could also benefit from an Alibaba relationship given a deficit in cash flow vs. Walmart, said Short, noting it still lacks a significant e-commerce business despite its high sales volume and massive customer base totaling 60 million U.S. households. “This base of high frequency shoppers would hold significant appeal for any nonfood retailer,” Short said. “If these high frequency shoppers could in fact be redirected to Alibaba’s extensive nonfood online offering.” 

Related:Whole Foods Debuts Prime Benefit

The report comes amid speculation of other Kroger dalliances with potential e-commerce players, including the online retailers Boxed and Overstock.