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Alibaba and Starbucks Deepen Their Ties

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Dec. 20 2018, Published 2:28 p.m. ET

Alibaba and Starbucks partnered on a delivery service

Starbucks (SBUX) has created a virtual store that makes all its digital services accessible in one place in China. Alibaba (BABA) provided the technology behind Starbucks’s new one-stop virtual store.

The launch of this one-stop virtual store represents the deepening of the ties between Alibaba and Starbucks. Back in August, Starbucks signed up to use Alibaba’s Ele.me service to deliver coffee to its customers in China. The service is available at more than 2,000 Starbucks stores across 30 Chinese cities.

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New Retail strategy

For Alibaba, tying up with retailers such as Starbucks fits into its so-called New Retail strategy, which is about blurring the line between the online and offline shopping experiences. Toward this end, Alibaba and its domestic rival JD.com (JD) are not only seeking partnerships with traditional retailers that operate physical stores but also opening their own physical stores.

JD, which struck a global expansion partnership with Google (GOOGL) in June, detailed a plan in April to open as many as 1,000 stores across China in 2018, Caixin Global reported.

e-Commerce companies have an appetite for real stores

But e-commerce operators’ appetite for physical stores doesn’t exist in China alone. Amazon (AMZN) has added more than 400 stores to its portfolio through its acquisition of Whole Foods, and it’s continued to open more retail outlets under brands such as Amazon Go.

Interest in physical stores among e-commerce companies has increased as they set their sights on the grocery market, a retail category that’s still dominated by traditional retailers.

Alibaba made a $2.9 billion profit in the second quarter of fiscal 2019, which ended in September. It posted a $3.6 billion profit in the third quarter of fiscal 2018, which ended in December 2017.

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