Here’s How Alibaba Can Benefit From Its Stake In Lianhua Supermarket

Chinese e commerce giant Alibaba (NYSE:BABA)is working aggressively towards an integrated retail model, which its founder Jack Ma refers to as “New Retail.” This will involve the integration of the online and offline channels, driven by logistics and data. In order to strengthen its position in this new environment, Alibaba is investing in brick and mortar stores, and the company recently acquired an 18% stake in the Lianhua supermarket chain, owned by the Bailian Group. In February, the company entered into a partnership with the Bailian Group to work towards the integration of offline stores with an online ecosystem, leading to an improved customer experience. (Read Alibaba’s Next Big Move In Retail: Partnership With Bailian Group).

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Leveraging Data To Analyze Buying Patterns

Through its investment in Lianhua, Alibaba will leverage its data capabilities to drive sales for Lianhua, which has been struggling to grow revenues. Alibaba is working with several brands such as PepsiCo and Mattel (who have stores in its online platform Tmall) to help them identify customer preferences through data analytics. A similar exercise with a physical supermarket should help Alibaba identify buying patterns of offline customers. This gives the e-commerce giant insight into what products customers prefer to purchase offline. Analysis of this data can help the company to work towards its integrated retail offering, where certain products are offered offline and others can be conveniently bought online. Several retailers, such as Wal-Mart, Home Depot and Best Buy, are benefiting from this integrated retail strategy, and while players such as Amazon are setting up their own brick and mortar stores, Alibaba is acquiring strategic stakes in brick and mortar stores for its “New Retail” strategy. In November last year, the company invested $305 million in Sanjang Shopping Club, a discount supermarket in China. This investment was aimed towards studying offline consumer behavior and identifying potential synergies (Read Here’s Why Alibaba Is Investing In A Physical Supermarket).

As the retail landscape evolves, the “online-only” model will face growth limitations. The presence of brick and mortar stores remains important to many customers, and there are several products which customers still prefer to buy in person. Alibaba’s strategy to continue its growth in this new landscape appears to be via strategic investments in brick and mortar retailers. The company is looking at leveraging data gathered from the buying patterns in these stores to formulate a future growth plan for its New Retail strategy.

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