Alibaba has divested its entire stake in hypermarket operator Sun Art (Sun Art Retail Group) for HK$12.298 billion ($1.58 billion), shifting its focus fully onto e-commerce as competition intensifies. Alibaba subsidiaries sold the 78.7 per cent stake to Chinese private-equity company DCP Capital for HK$1.75 per share, which was below the market price of HK$2.48. Alibaba expects to book a loss of roughly $1.8 billion on the deal. “This move may influence investor sentiment, leading
ading to a reassessment of valuations and future investment strategies within China’s hypermarket sector,” Derek Burke, chief commercial officer and co-founder at Amilo told Inside Retail.
“The divestment suggests that integrating large-scale physical retail operations with digital platforms presents significant challenges. Hypermarket operators may need to innovate and adapt to the rapidly evolving retail environment to remain competitive.”
Sun Art is known as a leading hypermarket and omnichannel retailer in China, with hypermarkets, superstores and membership stores under RT-Mart, RT-Super and M-Club. As of September 30, Sun Art had a total of 466 hypermarkets, 30 superstores and six membership stores in the country.
Alibaba acquired a 36.16 per cent stake in Sun Art for HK$22.4 billion in 2017 before securing a controlling stake in 2020 for US$3.5 billion. The company said in a filing the acquisition would help it “monetise its non-core assets and to utilise such proceeds to better focus on the development of its core businesses and enhance its shareholder return”.
The divestment of Sun Art follows Alibaba’s pattern of streamlining its offline retail holdings, with the company appearing to cut losses and refocus on its core digital businesses. Last month, the e-commerce giant was reported to sell department store Intime Retail to Chinese textile and clothing company Youngor Fashion for RMB7.4 billion ($1.02 billion) despite a $1.3 billion loss from the deal.
“When we look at the current state of e-commerce in China, Alibaba’s decision reflects a broader industry trend where e-commerce platforms are reassessing the value of physical retail investments. The move underscores the challenges of integrating offline assets with online platforms and may suggest a strategic shift towards enhancing digital capabilities without the complexities of managing traditional retail operations,” Burke said.
According to the filing, Sun Art saw its financial performance decline significantly, reporting a net loss of RMB1.7 billion for the fiscal year ending March 31 compared to a modest profit of RMB78 million in the previous year.
This strategic divestment comes at a crucial time for the Chinese e-commerce landscape, as competitive pressures continue to mount and consumer behaviors evolve rapidly. China’s e-commerce competition has intensified as major platforms including PDD Holdings’ Pinduoduo and Temu, as well as ByteDance’s Douyin and TikTok, have aggressively expanded their market share by offering deeply discounted products.
According to S&P Global, Alibaba can sustain its dominant position in China’s e-commerce market due to its large customer base and extensive product range. However, the slowing growth of e-commerce in China and the rise of newer platforms are loosening its grip on the market.
Burke said streamlining its operations to concentrate on its primary e-commerce and cloud computing businesses allows Alibaba to allocate resources more effectively, enhancing its competitive advantage against rivals such as JD.com and Pinduoduo, who are also vying for dominance in China’s e-commerce sector.
In November, Alibaba said in a stock exchange filing on Thursday that it would integrate its domestic Chinese and international e-commerce platforms into a single business unit run by one leader for the first time. The new unit, named the Alibaba E-commerce Business Group, brings together the Taobao and Tmall Group and the Alibaba International Digital Commerce (AIDC) Group.
In 2023, Alibaba underwent the largest restructuring in its 24-year history by splitting into six business units – Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Services Group, Cainiao Smart Logistics Group, Global Digital Commerce Group and Digital Media and Entertainment Group.
“By focusing on e-commerce and cloud computing, Alibaba is strategically positioning itself to harness the rapid growth in digital commerce and AI-driven solutions,” Burke said.
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