Alibaba invests billions in physical retail

Alibaba invests billions in physical retail

Over the past two years, Chinese eCommerce giant Alibaba has spent nearly seven billion euro in physical retail. Its Hema Xiansheng chain already has thirteen supermarkets and it acquired luxury department store Intime from the government in January.

Hema is not just some supermarket

Alibaba has developed from a online marketplace for local Chinese retailers (Taobao) to an entire ecosystem for consumers worldwide, including its own brands (Haier), a mobile payment service (AliPay) and even its own video services. Omnichannel is the future, the Chinese company said.

 

Just like Amazon, Alibaba has moved into its own version of high-technology supermarkets. Its omnichannel supermarket chain Hema (no relation to the Dutch store chain!) is several steps ahead of Amazon’s own venture into the the food retail industry. Hema Xiansheng has been active in the Chinese market since 20015 and opened another three stores in 2017. The chain now has thirteen supermarkets.

 

According to Alibaba CEO Daniel Zhang, these stores are “not a supermarket, not a food market, but a brand new model.” Shoppers can get fresh sea food prepared at a Chinese Hema and home-delivered within thirty minutes thanks to in-store picking. They can also scan barcodes with their smartphones for more information or use their device to pay using Alipay. The Hema app also provides personalized product suggestions.

 

Offline needed for further growth

“We believe the future of New Retail will become a seamless integration of both online and offline. Hema is a prime example of that evolution”, Zhang said. Nevertheless, Alibaba does not want to manage a major physical chain: both Hema and Intime are mainly examples that have to show New Retail’s advantages to both consumers and retailers alike.  

 

The company had already revealed it is not necessarily intent on increasing its Chinese eCommerce market share, which accounts for about 15 % of China’s overall retail value, but that it wants to digitize physical retail (the remaining 85 %) in order to enable further growth. If it wants to continue its consistent growth pace, it will indeed need to tackle physical retail.