Mainland ecommerce giant Alibaba revealed late last week that it has signed a cooperation agreement with five of China’s top 10 property developers to expand its Hema smart supermarket chain on the mainland.
The agreement between the Alibaba online to offline grocery chain and developers including top three builders China Vanke, Evergrande and Country Garden helps to secure new locations for Hema markets while Alibaba promises to assist the developers with making the jump with what Alibaba chairman Jack Ma has dubbed “the new retail.”
The online giant and its new developer friends unveiled the alliance at a signing ceremony in Shanghai, as China’s ecommerce players continue to compete for a bigger piece of the country’s offline retail market. Alibaba has set a target of opening 2000 Hema stores nationwide in the next three to five years, and had 22 of the high tech grocery store operating by the end of 2017.
Five of China’s Top 10 Developers Join Alibaba Effort
[adrotate group=”11″]Signing up to work with Alibaba in realising the future of groceries were units of top ten developers including Evergrande Real Estate, Country Garden, China Overseas Land and Investment and Sunac China Holdings, as well as Vanke’s retail arm SCPG. Also participating were players including Fosun-owned Shanghai Forte Land, KWG Property, and China World Trade Corporation,, according to an account in the Shanghai Securities Times.
In addition to the developers joining, retail operators Easy Home and Jia Hao Commercial also signed up to work with Hema, and representatives of Dalian Wanda Group, CapitaLand, China Resources and Longfor Properties are also said to have attended the signing ceremony.
Under the terms of the agreement, the developers are to provide Hema with store locations and related service support at their projects across the country. In return, the Alibaba venture promises to assist the developers in integrating their offline retail locations with the company’s host of online services.
“The New Retail is not a one-man show,” Hema CEO Hou Yi was reported as saying in the Securities Times report. “Hema will be working together with the commercial real estate industry to develop a new retail ecosystem through cooperation and mutual benefit.”
Ecommerce Giants Buy into Offline Retail
Alibaba is counting on its new partners to help it translate its dominance of China’s ecommerce into the offline retail world. In January the company announced that it would add 30 more locations to its Beijing portfolio, up from the current five venues.
The grocery initiative comes as China’s ecommerce players compete to invest in, or ally with, the country’s brick and mortar retail chains. The mainland retail move closely mirrors Amazon.com’s $13.7 billion acquisition last year of US grocery chain Whole Foods, as the cashed up tech companies look for ways to sell everything that everyone buys.
Alibaba’s biggest ecommerce rival, JD.com, opened its first 7Fresh grocery store in Beijing this January, with the goal of competing head to head with the Hema initiative. Then one month ago, JD signed an agreement with convenience store chain FamilyMart that will allow users of the ecommerce platform to have food delivered to their doors from any of FamilyMart’s core locations in Beijing, Shanghai, Shenzhen and Chengdu within one-half-hour, anytime 24 hours a day.
That pair of tie-ups came after JD invested RMB 4.3 billion in Yonghui Superstores in 2015, in return for a 10 percent stake in the mainland supermarket chain.
In addition to the food world moves, in February, Alibaba invested approximately RMB 5.45 billion ($866 million) for a 15 percent stake in a Chinese furniture chain operator Easyhome (居然之家), and JD took a cornerstone stake in the S$396.0 million ($301.7 million) March IPO of Sasseur REIT in Singapore, giving it a presences in China’s outlet mall world.
What Is The New Retail?
While the string of investments and cooperation agreements create a trail of activity, the precise nature of the new retail has not yet been as clearly established.
In the case of Alibaba’s Hema stores, the retail outlets combine online and offline by allowing shoppers to scan barcodes for items that they see on the shelves and complete their purchase via the company’s Alipay system before leaving the store. Hema then promises delivery in as little as 30 minutes to customers living with three kilometres of a store location.
The scan to buy system promises to provide shoppers with information on food origin and other details for items where these backstories are available. Hema also leverages Alibaba’s big data expertise to log customer purchase information to help shoppers build their own personalised product pages in the grocery chain’s app.
In a blog post on a company website introducing Hema’s O2O innovations last year, Alibaba chose to highlight the grocery store’s fresh food section, which allows customers to choose their own meals while they are still swimming and then have them cooked to order and eat them on site in the store.