(Yicai) Feb. 24 -- The founder of Freshippo, Alibaba Group Holding's fresh food supermarket chain, has opened a pet food store in Shanghai, planning a rapid expansion in the eastern city.

The first Pet & Fresh outlet opened in Shanghai on Feb. 22, Hou Yi recently announced. The brand plans to open 100 stores in the city by the end of this year.

Hou, who set up Freshippo in 2015, retired in March last year at the age of 60. His new company will adopt an omnichannel strategy, blending online and offline retail and focusing on new retail, discount pricing, bulk snacks, and social engagement for pets and owners.

Building Freshippo required massive upfront investment in supply chain, cold-chain logistics, and back-end systems, Hou told Yicai, adding that in his new pet retail business, the supply chains, logistics and back-office systems have become infrastructure, giving Pet & Fresh a competitive edge.

Customers can order online and receive products within 30 minutes for addresses within a three-kilometer radius from the store, he explained.

Rising online costs make physical stores a cost-effective alternative, Hou noted. If managed well, brick-and-mortar stores can offer lower prices than e-commerce platforms, he added.

Shanghai will be the initial market to test Pet & Fresh's operational efficiency. Each store will require an investment of around CNY500,000 (USD69,000), with break-even expected in 12 to 18 months, according to Hou's estimates. If profitable, the expansion will shift to a hybrid model, with company-run stores in urban areas and franchised outlets in the suburbs.

Pet & Fresh will focus on high-quality pet food and will not enter other related fields, such as pet grooming services or pet healthcare, Hou pointed out. However, he admitted he may consider venturing into pet breeding operations.

According to a white paper by the China Pet Industry Association, the country's pet economy surpassed CNY300 billion (USD41.4 billion) last year, with urban spending on dogs and cats rising 7.5 percent from the previous year.

Editor: Futura Costaglione