Alibaba Scales Back Bricks-and-Mortar Presence with $1.7 Billion Sale
In a significant move, Alibaba Group Holding has agreed to sell its entire stake in Sun Art Retail Group, China’s largest hypermarket operator, for a staggering HK$13.1 billion (US$1.7 billion). This deal marks a major shift in the e-commerce giant’s strategy, as it refocuses on its core online operations and cloud computing business.
A Strategic Retreat from Physical Retail
The sale, reached on the last day of 2024, involves the disposal of Alibaba’s interest in Sun Art at HK$1.75 per share. While the company is expected to book a 13-billion yuan (US$1.8 billion) loss attributable to its shareholders, the move is seen as a “good opportunity” to monetize non-core assets and channel resources into developing its core businesses.
A Pattern of Divestment
This is Alibaba’s second major divestment of a bricks-and-mortar business in recent months. In December, the company sold its entire stake in department store chain Intime Retail (Group) to Chinese apparel company Youngor Fashion and members of Intime’s management team, taking a 9.3 billion yuan loss in the deal. These transactions reflect Alibaba’s sharpened focus on its core e-commerce operations and cloud computing business, which oversees its artificial intelligence-related businesses.
Sun Art: A Leading Hypermarket Operator
Sun Art Retail Group is China’s leading hypermarket operator, with a significant presence in the country’s retail landscape. The company’s operations, including supermarket brands RT-Mart and Auchan, were integrated with several Alibaba platforms, including on-demand delivery service Ele.me, fresh food delivery service Taoxianda, and Tmall Supermarket.
A Shift in Strategy
Alibaba’s vision of a retail empire that combines strong online and bricks-and-mortar operations was derailed by headwinds, including the coronavirus pandemic and an economic slowdown that weakened consumer spending. Competition has also intensified in e-commerce, led by PDD Holdings-owned Pinduoduo and Douyin, the Chinese version of TikTok operated by ByteDance. As a result, Alibaba has been forced to conduct a sweeping restructuring of its sprawling business empire.
A New Era for Alibaba
In November, Alibaba announced that it will merge its domestic and overseas e-commerce operations into one unit under chief executive Jiang Fan, the group’s 39-year-old heir-apparent. This move marks a significant shift in the company’s strategy, as it seeks to refocus on its core strengths and drive growth in a rapidly changing market.
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