Chinese online retail giant Alibaba has purchased a 10% stake in supermarket operator New Huadu Supercenter. The supermarket operator has outlets in southern China’s Fujian province. Though the amount Alibaba invested in the supermarket operator was not disclosed, the two parties will invest approximately $15 million in a joint venture.
This is the latest effort by Alibaba in the e-commerce giant’s strategy of merging online retail and offline retail. In this strategy dubbed Hema, physical stores are equipped with online data to allow visitors to access information on items which bear barcodes. When these items are scanned using a mobile device, information concerning the product is availed to the users. Recommendations for similar items are also given to the user.
In the Hema strategy the barcodes support the Alipay digital payment service and this is what users pay with at checkout. Additionally the physical outlets also act as pickup points for items that were bought online. Other uses of the Hema app includes letting users search and purchase products from the store that is closest to them as well as keeping tabs on their shopping history. The Hema app is also used in making recommendations as well as providing users with customized product pages.
Reports indicate that the shoppers who visit Hema stores on average make 4.5 purchases every month. The conversion rate of Hema app users on the other hand is about 35% while orders made online are about 50% of the total purchases. For the oldest stores, online orders are about 70% of all orders.
“We believe the future of New Retail will be a harmonious integration of online and offline, and Hema is a prime example of this evolution that’s taking place,” said the chief executive officer of Alibaba Group, Daniel Zhang, last summer with regards to online retailer’s Hema strategy.
Though not much was revealed concerning Alibaba’s joint venture with New Huadu, it’s likely that it could involve making acquisitions in grocery food stores both in China and other parts of the world. Five months ago Alibaba acquired an 18% stake at a price of $81 million in Lianhua Supermarket Holdings. In August reports indicated that Alibaba was preparing to acquire BigBasket, an online grocer. Alibaba is also putting up a mall at its Hangzhou headquarters which is expected to be launched next year in April. Named More Mall the shopping center will meld both offline and online retail.