Caixin
Jul 25, 2017 04:27 AM
BUSINESS & TECH

Supermarket Chain New Hua Du Acquires China’s Top Vending Machine Company

New Hua Du, with a market value of 5.7 billion yuan, is smaller than its new subsidiary Ubox, which has a market value of 6.5 billion yuan. Above, a customer scans a payment QR code on a Youbao vending machine in Beijing in May 2014. Photo: Visual China
New Hua Du, with a market value of 5.7 billion yuan, is smaller than its new subsidiary Ubox, which has a market value of 6.5 billion yuan. Above, a customer scans a payment QR code on a Youbao vending machine in Beijing in May 2014. Photo: Visual China

(Beijing) — A Chinese supermarket chain is embracing the emerging concept of staffless retail, acquiring the country’s top vending-machine operator just weeks after Alibaba and Auchan launched futuristic self-service convenience stores.

Fujian-based New Hua Du Supercenter Co. Ltd. said it has inked an equity-swap agreement with Beijing Ubox Online Technology Corp. Under the deal, Ubox — which runs more than 57,000 vending machines, the most in China — will be absorbed into New Hua Du.

The deal’s financial details haven’t been finalized, New Hua Du said in a statement on Saturday.

New Hua Du is the leading retailer in China’s southeastern Fujian province, with a market value of 5.7 billion yuan ($850 million), smaller than its new subsidiary Ubox, which has a market value of 6.5 billion yuan.

Some observers called the move a shortcut for Ubox — which is listed on the New Third Board, the national over-the-counter (OTC) exchange — to get onto the Shenzhen Stock Exchange, where New Hua Du is listed.

Upon completion of the deal, Ubox will delist from the OTC platform while New Hua Du will expand its market capitalization.

But analysts also said the deal will provide opportunities for both sides to explore new business models.

“The acquisition comes at a time when staffless retail is hot,” said Wang Liting, an analyst from Haitong Securities. “The deal will enable integration between supermarkets and smart vending machines.”

Both online and offline retail giants are becoming smarter and more automated. After U.S. e-commerce titan Amazon.com Inc showcased its groundbreaking Amazon Go self-service shop last year, several Chinese approximations appeared, including Alibaba Group Holding Ltd.’s Tao Cafe in the eastern city of Hangzhou and French retail leader Groupe Auchan SA’s BingoBox in Shanghai.

Companies with brick-and-mortar store experience, such as New Hua Du, have advantages in supply chain, warehousing and logistics, which largely facilitate their transformations, Wang said.

In 2016, New Hua Du’s profit rebounded to 54 million yuan from a loss of 373 million yuan a year earlier, driven in part by the three profitable e-commerce subsidiaries it acquired last year.

The company will continue to integrate e-commerce into traditional retail, it said in its 2016 annual report.

The vending machine market has significant potential in China, Wang said, with an estimated demand of 30 million units. Last year, Ubox’s profit more than doubled to 81 million yuan.

The company has also begun exploring other businesses, including M-Bar, a mini-karaoke service launched July 2016. The service allows customers to book singing booths placed in shopping malls. So far, Ubox has installed more than 2,000 M-Bars, which over five months last year generated 990,000 yuan in revenue.

Contact reporter Coco Feng (renkefeng@caixin.com)

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