Chinese ecommerce giant Alibaba (BABA) has acquired an 18% stake in Lianhua Supermarket Holdings Co. Ltd. as it seeks to expand more into the physical world of retail.

According to media reports,BABA is paying around $81 million for the shares in the Chinese supermarket operator, becoming its second-biggest investor. According to a report on the China Money Network, it is buying the shares from Yiguo, a fresh-produce-delivery company that Alibaba backed via funding rounds in 2013 and last year.

 

The 'New Retail'

The move to acquire the minority stake comes just a few months after announcing an alliance with Lianhua parent Bailian Group, China's biggest retailer in terms of number of stores, to help the offline company improve profit and sales from physical stores by using and analyzing big data. There were no financial aspects to that deal, but it does help Alibaba expand into the retail market as its core ecommerce business starts to mature. The company is also putting more focus on digital payments, cloud computing and expanding outside of China. Alibaba chief Jack Ma thinks it can help retailers improve the experience for their customers by way of technology. Bailian owns 4,700 retail locations including convenience stores, supermarkets and pharmacies and has locations in 200 cities, noted TheStreet.com. (See also: Alibaba: Raymond James Likes What It Sees.)

The investment is part of Ma’s vision of the future for retail—what he calls “New Retail.” Ma warned in a letter to shareholders last year that the ecommerce market will evolve, with sales being driven by a melding of online commerce, offline logistics and data. Those that don’t adapt stand to face challenges. (See also: Alibaba's Cainiao Invests Billions in AI Vans.) 

The investment in Lianhua comes just a few days after Alibaba led a $1 billion-plus investment in Ele.me, the Chinese food delivery service. Bloomberg reported that with the funding, the startup, which operates in a crowded marketplace, will be valued at between $5.5 billion and $6 billion. The funding is going to help it compete against a service backed by China's Tencent Holdings called Meituan Dianping. The market for services provided via a mobile phone, whether to place food delivery orders or book beauty treatments, is booming in China. Bloomberg notes sales of this type of service are forecasted to hit $1.1 trillion in 2017.

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