Jack Ma's Alibaba is doubling down on its supermarket strategy

Key Points
  • Alibaba has opened three new Hema supermarkets where customers can shop both online or in store
  • Those stores are part of the company's "new retail" strategy
  • The Hema mobile app uses big data analytics to offer customized recommendations for consumers

Alibaba stepped up its push to blend online and offline shopping with the launch of three new supermarkets in Beijing and Shanghai, as part of its "new retail" strategy, the company announced Monday.

From within those outlets — called Hema stores — customers can shop, dine and order groceries for delivery from their mobile phones and use Alipay to make payments. While the stores look like normal neighborhood supermarkets, Alibaba said every item has barcodes that can be scanned to reveal price and product information.

"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," Daniel Zhang, CEO of Alibaba Group, said in a prepared statement.

Jack Ma, founder of the Alibaba Group.
Wang He | Getty Images

Users sign up for a Hema membership through their Taobao or Alipay accounts.

Hema stores were first introduced in 2015 as an attempt to reinvent traditional supermarkets. To date, there are 13 of them in Shanghai, Beijing and Ningbo, and they serve customers located within a 3-kilometer radius to ensure shorter delivery times, according to Alibaba.

Some analysts expect Alibaba's strategy to lead the market in going after China's large number of consumers who still shop offline.

"The integration of grocery stores, food-service businesses and restaurants with new technologies and e-commerce has formed the embryo of the (online-to-offline) new retail," Julia Pan, analyst at UOB Kay Hian, said in a note last Friday.

Pan added that China's "online retail market is still under-penetrated at the rate of 15 percent of total retail market size, and Alibaba has an 11 percent market share of China's retail sales."

She said it is likely there could be an "increasing number of new retail stores launched in China" following the introduction of Alibaba's strategy.

Alibaba uses big data analytics to remember purchase preferences for each customer and make personalized recommendations on the Hema app. It also provides a data-driven selection of fresh food to customers based on their locations.

The idea of e-commerce players moving into brick-and-mortar spaces has seen big moves in recent years — as internet companies attempt to capture more of the offline retail market. Most notably, earlier this year, Amazon said it planned to buy U.S. grocery store chain Whole Foods Market in a deal valued at $13.7 billion.