Bloomberg reported that Alibaba Group Holdings Ltd. is planning to purchase a 15% stake in a home improvement and furniture chain in China for $865 million. The name of the company is Beijing Easyhome Furnishing Chain Store Group Co. The tech giant will support the chain’s 223 brick-and-mortar stores by utilizing its expertise in the cloud as well as logistics online platforms.
According to Alizila, the news website of the Alibaba group, Easyhome has 223 store spread across 29 provinces, autonomous regions and municipalities in China. The company said that this investment was going to combine the expertise of the world’s biggest online platform with the offline resources of Easyhome.
Alibaba has an active user base of more than 580 million people. Therefore, the tech giant has a unique capability of providing its partners with insights into customer preferences as well as buying behavior. This would then provide both online as well as offline customers with a holistic home improvement solution.
This investment is a part of Alibaba’s founder and Executive Chairman, Jack Ma’s strategy called the “new retail” initiative. Through this initiative, Jack Ma is linking his online businesses with brick-and-mortar stores. He is planning to tap into the potential of the $605 billion Chinese retail market.
This is what Amazon is doing in the US, and both companies are shaking up supermarkets and department stores with this expansion strategy. However, Alibaba has taken this strategy even further.
The Chinese tech giant has enlisted more than 500,000 mom-and-pop stores across the country in an effort to woo customers both online as well as offline. By linking directly to these tiny stores, Alibaba has eliminated the need for profit leeching middlemen, which means that both Alibaba as well as the mom-and-pop stores will benefit from the association.
Additionally, these little stores across the country will also act as storage and delivery centers for Alibaba’s online businesses. This means that the company’s logistics and delivery capability expands exponentially and the business can now reach customers located in the remotest parts of the country. Alibaba has already spent more than $15 billion in this project.
Earlier this month, Alibaba had reported revenues that beat market expectations. The company also raised its growth guidance. However, Alibaba’s shares dropped after the numerous investments made by the company reduced profit margins in the fourth quarter.
Currently, Tmall, a business to customer selling platform and Taobao, a peer-to-peer selling platform, are the main revenue generators for the company. And while e-commerce continues to be the main driver of business growth for Alibaba, the company is also investing in new businesses.