Chinese discount online retailer Vipshop has announced that it will pay 2.9 billion yuan ($422 million) to acquire brick-and-mortar chain Shan Shan Outlets, furthering its expansion into physical retailing.

Vipshop said the deal would help it “gain presence” in China's offline retailer business and strengthen its position in the domestic discount retail segment.

But investors were skeptical with stock in New York-listed Vipshop Holdings closing 7.51% lower on Wednesday.

Founded in 2008, the company counts internet giant Tencent and e-commerce company JD.com as stakeholders. Shan Shan Outlets is headquartered in eastern China’s Zhejiang province and operates five sites in China, with plans to open another five by the end of next year.

Related: Tencent, JD.com Take Stake in Discount Online Retailer