Is a Kroger-Alibaba Partnership in the Works?

Senior executives from the Kroger Co. have met with senior officials at Chinese ecommerce and technology company Alibaba Group Holding Ltd., the world’s largest retailer and one of its largest Internet companies, the New York Post reported, citing multiple sources. The news follows speculation that the Cincinnati-based grocer is considering purchasing durables ecommerce business Overstock.com and ecommerce club-store startup Boxed.

While the exact subject matter of the meetings is unknown, a report in a Chinese government press release claimed that Alibaba has teamed with Kroger to “speed up the integration of online and offline sales.”

Although the meetings were not at CEO level, and Kroger is one of many U.S. companies holding initial discussions with the ecommerce giant, the grocer could make a prime partner for Alibaba, which has been making an “aggressive push” into working with companies in the United States and Canada, Reuters reported.

One food retailer Alibaba backs abroad is Hema Xiansheng, which the Post said is at the “forefront of technology,” serving as a warehouse and distribution center for online sales, and delivering items in as few as 30 minutes within 2 miles of a store – not a far cry from Amazon’s Prime Now delivery service. Also similar to Amazon, Alibaba operates cashierless stores with technology similar to Amazon Go stores.

The news was revealed just days after Amazon opened its Amazon Go concept to the public following a 10-month delay, and roughly five months since Amazon completed its acquisition of Austin, Texas-based natural grocer Whole Foods Market, which has hurt Kroger’s stock performance.

It’s worth noting not only that is Kroger the largest grocery company in the United States, but also that Alibaba is gigantic, at nearly four times the gross merchandise volume of the Seattle-based ecommerce behemoth. Therefore, Alibaba can merchandise to Kroger, allowing the grocer to enter new merchandise categories, said Erich Joachimsthaler, CEO of Vivaldi, a New York-based brand strategy firm.

Moreover, Alibaba can offer Kroger innovations that work in its physical stores in China – such as its Amazon Go-like technology, which would provide a leg up since Amazon itself arguably still has flaws in its own in-store technology that it needs to work out.

What Americans might not know is that even though Amazon now owns Whole Foods and has opened a number of physical bookstores and its own Amazon Go store to the public in the United States, Alibaba has penetrated physical retail in China far more deeply than Amazon has here. If Alibaba can apply its experience advantage through Kroger in the United States, then an Alibaba-Kroger partnership would pose a significant threat to Amazon.

“This will help Kroger to leapfrog both Amazon and Walmart,” Joachimsthaler asserted. “This partnership blunts the Amazon efforts into groceries.”

And while the news angle Stateside is on how such a partnership could help Kroger become a significant threat to Amazon domestically, the angle abroad is on how Kroger’s operations and expertise could help Alibaba keep out of physical retail in China. In addition to the two being able to share rich customer data and insights, Alibaba has a local supermarket chain in China that Kroger could integrate with.

“Perhaps Kroger is looking for a way to extend their brand franchise into China and partner with Alibaba in a similar way as Amazon and Whole Foods?” asked Jim Fosina, CEO of Fosina Marketing Group, a Danbury, Conn.-based marketing firm.

It’s known that Amazon wishes to enter the Chinese market. If Alibaba connected with Kroger, it would be possible for the Chinese company to learn from the U.S. grocer – and build its own version of Amazon Go stores in China. This could shut Amazon out of that market before its develops a foothold – as it has done in the United States with its Whole Foods acquisition.