Online retailer Yihaodian.com says that it will invest one billion yuan in a three-month attack on Alibaba's Tmall supermarket. This is the first strategic move Yihaodian has made since being acquired by  e-commerce giant JD.com in June.

Yihaodian says it will offer lower prices than Alibaba's Tmall supermarket, and also provide some free deliveries. Yihaodian hopes its new campaign will attract customers nationwide, especially in China's first and second tier cities.

Alibaba had announced just last month that it will be putting four billion yuan into its Tmall supermarket as customer subsidies. Both companies online supermarkets were in the red last year, but Yihaodian says their price wars will continue.

"I think everyone is in a very fast expansion phase. So that's why we are all using a very radical approach - price wars - to get what we want. It is the fastest approach," said Song Chunlei, senior VP, Commercial & Merchandising, Yihaodian.

"If you take a look at the companies which can afford to be in a price war, you'll see that they all have many businesses in addition to online supermarkets. So there will be a strategy in terms of revenue structure, to effectively support the expansion of the online supermarkets in order to achieve lower costs and higher profits."

E-commerce giant JD.com acquired Yihaodian from offline retailer Walmart for nearly ten billion yuan in June. Other big players are entering the battlefield as well. China Resources is counting on its partnership with Meituan Dianping to put CRC's traditional supermarkets online.

It's estimated the online sector takes up only 7 percent of the  supermarket sector in China, and the competition now is aimed at expanding that sector, and seeing who will come to dominate it.