Alibaba Opens More Physical Stores As It Pursues Online-Offline Strategy

Three new physical stores have been opened by Alibaba Group in Shanghai and Beijing as the online retail giant pushes its online-offline strategy by increasing the number of physical locations it has across China to 13. The new retail strategy or ‘Hema’ was unveiled by the retailer two years ago in a move meant to reinvent the concept of traditional stores by combining offline experiences with online experiences.

Using the investments that Alibaba has made in technology and big data, the items in the Hema stores are identified by use of barcodes and this offers customers more information on the stocked products besides recommendations on products of a similar nature. Using the mobile app of the vendor, customers are able to scan the barcodes which are linked to the Alipay platform. Payment for items can also be done at the counter using Alipay.

Fulfilment centers

The Hema stores are also fulfilment sites for orders placed by customers via the app. This is made possible by store employees who scan and pick up the items that have been ordered and then prepare them for delivery. Every store serves customers who are located within a three-kilometer radius and this ensures that deliveries can be made with half an hour after the making of the order.

Customers who shop at the Hema stores also have access to a membership scheme for which they can sign up with their Alipay and Taobao accounts. Through the app their purchase patterns are tracked and they are then given customized recommendations besides access to product pages that are customized for each individual user.

Software algorithms

The data so obtained has also allowed Alibaba to curate fresh produce and food for Hema store on the basis of the customers who live within the three-kilometer radius. Delivery routes are also plotted using the software algorithms.

Since the initial Hema store was opened about one and a half years ago, the sales for each unit area were found to be 3 or 5 times higher than in traditional supermarkets. Users of the Hema app had a conversion rate of 35%. According to Alibaba, Hema shoppers made an average of 50 purchases a year and between four and five every month. More than 50% of the total orders were online 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 Daniel Zhang, the chief executive officer of Alibaba Group.