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Alibaba sells Sun Art hypermarket chain for US$1.7 billion to refocus on e-commerce

Alibaba sells Sun Art for US$1.7 billion, marking a strategic shift to focus on e-commerce and cloud computing while exiting brick-and-mortar retail.

Alibaba Group Holding has sold its entire stake in Sun Art Retail Group, Chinaโ€™s largest hypermarket operator, for HK$13.1 billion (US$1.7 billion). This move reflects the companyโ€™s strategic shift towards strengthening its e-commerce and cloud computing operations.

A step back from bricks-and-mortar

Alibabaโ€™s deal with Chinese private equity firm DCP Capital was finalised on December 31, with the sale price at HK$1.75 per share. This transaction, detailed in a January 1 filing to the Hong Kong Stock Exchange, signifies a major pivot for the e-commerce giant.

The sale is expected to result in a 13-billion yuan (US$1.8 billion) loss attributable to Alibabaโ€™s shareholders. However, the company views this as an opportunity to monetise non-core assets and redirect funds towards its primary business areas.

This is not Alibabaโ€™s first divestment in traditional retail. In December, the company sold its stake in Intime Retail (Group), a department store chain, to the management of Chinese apparel firm Youngor Fashion and Intime. That deal incurred a 9.3-billion yuan loss for Alibaba. These decisions are part of group CEO Eddie Wu Yongmingโ€™s plan to prioritise e-commerce and cloud services, including artificial intelligence initiatives.

The rise and fall of Alibabaโ€™s retail ambitions

Alibaba initially invested in Sun Art in 2017, gradually increasing its stake and taking control in 2020 for HK$28 billion. The acquisition was part of a vision to create a “new retail” model by blending online and offline shopping. Sun Artโ€™s supermarket brands, such as RT-Mart and Auchan, were integrated with Alibabaโ€™s platforms like Tmall Supermarket, Ele.me, and Taoxianda.

However, this vision faced significant obstacles. The COVID-19 pandemic, combined with an economic slowdown, dampened consumer spending. Meanwhile, competition in e-commerce intensified, with Pinduoduo and ByteDanceโ€™s Douyin offering aggressive discounts to attract customers.

In response, Alibaba has comprehensively restructured its vast business empire. In November, it merged its domestic and international e-commerce operations under one unit led by Jiang Fan, the groupโ€™s heir-apparent.

A new focus for Alibaba

Selling Sun Art signals that Alibaba is doubling down on its core strengths. The companyโ€™s filing noted that the move allows it to allocate resources better to areas like e-commerce and cloud computing.

This strategic shift comes as Alibabaโ€™s stock continues to face challenges. Its shares in Hong Kong closed at HK$82.40 on December 29, having lost over 70% of their value since a peak in late 2020.

The sale also follows months of speculation. Investors anticipated a move after Sun Artโ€™s shares were suspended in September, citing the potential announcement of a mergers-and-acquisition deal.

With the Sun Art chapter closing, Alibabaโ€™s focus now turns to revitalising its e-commerce business amidst fierce competition and economic challenges.

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