Tech Companies in China Struggle in Their Efforts to Turnaround the Supermarket Industry
The supermarket sector can be regarded as one of the bedrocks of most developed economies since a large portion of the population shops at one of those establishments at least once a week. However, the way in which the tech sector has managed to revolutionize a whole range of industries in the world, it was only a matter of time before they went into supermarkets in a big way. In China, some of the biggest entities in the tech industry like Alibaba and Tencent have picked up significant stakes in supermarket chains. However, the extensive use of artificial intelligence and data has not led to the sort of revolution that many might have been hoping for.
Over the course of the past few years, the investments in the supermarket sector have been heavy from the leading lights of the Chinese tech sector. For instance, e-commerce behemoth Alibaba sunk as much as $10 billion across a range of retail investments that included everything from supermarkets to furniture retail. On the other hand, one of Alibaba’s fiercest rivals in the tech sector, Tencent acquired a 5% holding in the supermarket company Yonghui. The acquisition cost Tencent $636 million. However, despite the usage of modern technology and innovative techniques, the companies in question are struggling to really make a dent in their investment. Tencent made the investment in 2017, but it is still struggling with the acquisition. However, it is important to note that Yonghui is one of the biggest supermarket chains in China and has a market capitalization of $13 billion.
It takes a lot to truly bring about transformative change in such a large company. The chief tech officer of the cloud computing division at Yonghui stated Tencent’s data analysis on people is very strong. Our retail and their social networks can be combined. We work with Tencent to create portraits of users, and then predict their preferences. Now this is the sort of initiative that could create a lot of value for a retailer which gets footfalls of millions of people at its stores every year. Although the tech sector has sunk a lot of money into this particular sector, it is believed that it will take some time before these companies are able to truly turn around these sectors. Additionally, Amazon’s acquisition of Whole Foods may have been an important factor behind these moves by the Chinese tech giants.