Dive Brief:

• Chinese e-commerce giant Alibaba Group has taken an 32% interest in Sanjiang Shopping Club for 2 billion yuan (about $290 million), Bloomberg reports.

• Sanjiang is a membership-style Chinese discount grocery chain that operates about 160 stores across the eastern province of Zhejiang and boasts more than a million members. 

• Alibaba's purchase involves 1.52 billion yuan of new shares, 438.6 million yuan of stock from existing holders, and 188 million yuan of convertible bonds via a private sale; if converted, the bonds would account for 3% of equity, according to Bloomberg. Sanjiang said in a stock exchange filing that Alibaba doesn’t plan to increase its stake in the next 12 months.

Dive Insight:

In a letter to shareholders last month, Alibaba CEO Daniel Zhang made it clear that the company is making brick-and-mortar retail a key part of its growth strategy. The company has already partnered with brick-and-mortar retail businesses like Suning Commerce Group (in which it is a stakeholder) and Intime Retail Group to realize efficiency gains across product manufacturing, distribution and service.

Amazon is also moving assertively into physical retail, and more niche e-commerce darlings like Warby Parker, Bonobos and Casper Mattress are increasingly setting up physical shops as well. 

In fact, many e-commerce retailers may be blithely unaware of some of the more subtle advantages that brick-and-mortar retailers enjoy. It’s all related to “touch and feel,” and also has to do with emotional reactions humans have in a physical environment, web psychologist Liraz Margalit of digital customer experience solutions startup Clicktale, told Retail Dive last year. 

Brick-and-mortar provides not just an effective way to interact with consumers, but also in many ways offers a more efficient fulfillment and delivery system than e-commerce. “[S]elling on the internet is not efficient,” Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive earlier this year. “The whole methodology of selling on the internet is completely foreign to what it’s like selling at a Wal-Mart.” 

Selling on the internet can be lucrative, however, as Alibaba's recent Singles Day event proved. Singles Day sales processed through Alibaba founder Jack Ma’s Alipay unit totaled a record-setting $17.8 billion of gross merchandise volume across Alibaba's China and international retail marketplaces, a 32% increase over last year's shopping event. Mobile GMV settled through Alipay accounted for 82% of that total, compared to 69% in 2015. Shoppers from 235 countries and regions completed cross-border Singles Day transactions on Friday, and 37% of total buyers purchased items from international brands or merchants.