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Updated February 5th, 2024 at 10:32 IST

Alibaba contemplates sale of consumer assets: Report

Alibaba has initiated discussions with both strategic and financial investors regarding these assets, including shopping mall operator Intime.

Business Desk
Alibaba CEO Eddie Wu
Alibaba | Image:x/@Investingcom
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Alibaba Group is reportedly considering the sale of several consumer sector assets, including the popular grocery business Freshippo and the retail giant RT-Mart. The decision is in line with the company's recent shift under Chairman Joe Tsai and newly appointed CEO Eddie Wu to divest non-core, loss-making units and prioritize its profitable e-commerce business model, according to insider sources familiar with the matter.

Alibaba has initiated discussions with both strategic and financial investors regarding these assets, including shopping mall operator Intime, indicating a potential broad restructuring within the company. However, sources caution that these talks are in the early stages, and Alibaba may choose not to proceed with the divestment.

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The move aligns with Alibaba's broader strategy outlined by Wu, who took the reins after Daniel Zhang stepped down in September. Wu emphasized a more independent market approach for each business unit, conducting strategic reviews to distinguish between "core" and "non-core" businesses.

The potential sale also comes amidst China's heightened scrutiny over initial public offerings, creating additional challenges for startups to raise funds in the capital markets. Analysts suggest that Alibaba's management, under Wu's leadership, is keen on focusing resources on its core e-commerce, artificial intelligence, cloud computing, and overseas expansion, rather than maintaining offline businesses.

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Notably, this shift raises questions about the viability of integrating offline businesses, like RT-Mart and Freshippo, with Alibaba's core online commerce business. Jason Yu, the Greater China Managing Director of market research firm Kantar Worldpanel, notes that these offline ventures demand significant effort and resources, presenting challenges in seamless integration.

Freshippo, known as Hema in Chinese, is a prominent supermarket chain in China offering diverse services, including dine-in options and 30-minute home delivery. Although plans for a Hong Kong listing were temporarily halted in 2021 to assess market conditions, the grocery chain has not completed its fundraising, aiming for a valuation of about $6 billion in 2022, significantly lower than the initially envisioned $10 billion.

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Alibaba's previous investments in the consumer sector include a $3.6 billion acquisition in 2020 for a controlling stake in Sun Art Retail Group, the operator of RT-Mart. Despite these expansions into China's brick-and-mortar retail, the company faces the challenge of translating these strategies into profits, raising questions about the long-term sustainability of its ventures in the sector.

As Alibaba undergoes potential structural changes, the market awaits further developments and the company's official statements on its divestment plans.

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(With Reuters inputs)

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Published February 5th, 2024 at 10:32 IST

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