Alibaba Group, a China-based e-Commerce giant, has signed a deal to invest £415m in Chinese department store operator Intime Retail, with an aim to expand its online operations.

Under the deal, Alibaba will take approximately 26.1% stake in Intime Retail, which operates 36 department stores in China, and will form a joint venture to develop online-to-offline (O2O) businesses, including shopping malls, department stores and supermarkets in China.

Online retail sales currently account for less than 10% of all retail spending in China, and Alibaba is eyeing physical stores as a growth opportunity.

Intime had previously teamed up with Alibaba’s e-payment affiliate, Alipay Wallet, to offer shoppers with cashless payment option that can be made through their mobile phones at Intime’s stores.

According to research firm Analysys International, Alipay Wallet currently has over 100 million users, and account for 70% of China’s estimated $209bn market for mobile payments in 2013.

The move by Alibaba came as many local internet retailers are looking for physical-world applications for their online services.

The latest investment follows Alibaba’s recent investments made in taxi-hailing application Kuaidi Dache that helps users find nearby cabs and allows them to pay through Alipay, and in TangoMe that runs a popular messaging application.