Alibaba is further expanding its presence in the U.S. retail market with its plans to invest about $80 million in grocery shopping app Boxed Wholesale.
The two-year-old company, which was founded by CEO Chieh Huang, works on a business model that can be called an amalgam of Amazon and Costco. It currently offers three-day free delivery to its customers on orders of over $50 through its app, Bloomberg reported.
With its zero dollar membership fee, it steers away from Amazon, which provides free delivery though its $99 Prime membership, and wholesale retailer Costco, which charges its members $55 for access to its wholesale warehouses.
The funding comes after Boxed secured funding of $25 million for its Series B round led by GGV Capital in January.
Alibaba’s investment in Boxed Wholesale will further intensify competition for Seattle-based Amazon and its new rival, Jet.com, which also saw investment from Alibaba.
The move also signal’s Alibaba’s growing interest in cutting itself a bigger slice of profit in the American grocery delivery market — a $10.9 billion industry that is expected to grow at 9.6 percent annually well into 2019. However, its investment in Jet.com and now Boxed Wholesale comes after its failed efforts to tap into the market through its online marketplace 11 Main, which focused on smaller merchants offering unique goods, according to Bloomberg.
Now, with investment in Hoboken, NJ-based Jet.com and Boxed, Alibaba is more determined to become a household name like Amazon as the two startups gain attention and broaden their reach. Nonetheless, it’s set to be a steep climb for Alibaba with competitors offering faster and cheaper delivery. Instacart, for instance, is now offering same-day delivery in partnership with Target for $3.99 per order. Also, Amazon is expanding its free same-day delivery service to its Prime members in 20 cities.
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