As part of the transaction, Alibaba and Shandiangou will cooperate on traffic flows and logistics.
Shandiangou – which means shopping with lightning speed – will allow Alibaba users to access its platform to buy groceries from local convenience stores with one-hour delivery using their mobile apps.
Founded in 2014, the Hangzhou-based startup was launched by two former Alibaba employees, Wang Yongsen and Wu Qiangqiang.
Shandiangou now claims to operate in five major cities in China with seven million users and daily orders of up to 50,000. It plans to expand into 10 cities at the end of the year.
Shandiangou in 2014 received an undisclosed series A round from Matrix Partners China and Yunjing Capital. This was followed by a $25 million series B funding round that it completed in 2015, led by Shunwei Capital Partners and H Capital, participated also by Matrix and Yuanjing.