Alibaba's New Retail Major Withdrawal

Author | Liu Baodan

Editor | Zhou Zhiyu

Once, Intime was one of Alibaba's biggest bets in its new retail strategy. Seven years ago, Alibaba spent 17.7 billion to acquire it at a very high premium.

However, as Alibaba focuses on its core business, it has reluctantly let go of Intime, its most representative new retail project.

On December 17, Alibaba announced through a notice that the company, along with another minority shareholder, agreed to sell 100% of Intime's equity to a buyer consortium composed of members from the Youngor Group and Intime's management team. Alibaba currently holds about 99% of Intime's equity.

In this transaction, Alibaba's total proceeds from the sale of Intime amount to approximately 7.4 billion, and it will record a loss of about 9.3 billion due to the sale of Intime.

The nearly 10 billion loss is a clear indication of Alibaba's determination to divest non-core assets and focus on its core business. In addition to Intime, there have been rumors of sales regarding Hema and GaoXin Retail, indicating Alibaba's withdrawal from new retail. Furthermore, Alibaba is also selling shares in Bilibili, hello Group, XPeng, and others.

This shift reflects the Chinese internet industry's farewell to the high-growth phase, gradually entering a stock market. The once-booming era of internet giants' expansion is quietly coming to an end amid a series of sell-offs.

For Alibaba, it must concentrate on addressing the impending AI era, which will be an unprecedented and brutal battle.

Divestiture

One is China's largest e-commerce platform, and the other is a high-end department store brand in China; such a strong alliance has come to a parting of ways.

Taking over Intime is a buyer consortium composed of members from the Youngor Group and Intime's management team. Youngor is a leading enterprise in the national textile and apparel industry, and its current strategic direction is to become a global fashion group.

According to insiders from Wall Street, this investment is led by Youngor Group, with Intime's management also participating in the investment. The cooperation aims to "strengthen and supplement the supply chain" and develop Intime together. In other words, Intime will still be managed by the company's management team in the future.

The financial backer behind Intime has shifted from Alibaba to Youngor, which is both a proactive choice by Alibaba and a new plan by Youngor for the future.

As a leading enterprise in the domestic market, Youngor Group achieved sales revenue of 191.6 billion in 2023, ranking 36th among China's top 500 private enterprises. Currently, the company's fashion business is implementing a large store strategy in core cities across the country and is building a new retail system through the integration of online and offline channels.

From this perspective, there is a strong business synergy between Youngor and Intime. Intime Department Store has over 60 malls nationwide, which can not only help Youngor open stores quickly but also accelerate its digital transformation.

For Alibaba, letting go of Intime while facing significant losses is not an easy decision. Prior to this, Alibaba spent 10 years conducting a new retail experiment.

Jack Ma and Intime Group founder Shen Guojun are both from Zhejiang, and it is said that a conversation between the two on a plane led to the birth of Cainiao, with Shen Guojun being one of the earliest investors in Cainiao. This foundation also laid the groundwork for future cooperation between Alibaba and Intime.

In 2014, based on the judgment of the integration of online and offline retail, Alibaba invested in Intime, holding more than 25% of the shares; in 2015, under the promotion of Daniel Zhang, Alibaba increased its stake to 32%, becoming the largest single shareholder of Intime; In 2017, Alibaba privatized Intime for 17.7 billion yuan, completely bringing Intime under Alibaba's umbrella.

During the same period, Alibaba also invested in Sanjiang Shopping, Lianhua Supermarket, GaoXin Retail, Suning, and others. Notably, through continuous capital increases in GaoXin Retail, Alibaba holds 78% of its shares. According to incomplete statistics, Alibaba's total investment in offline retail at that time exceeded 75 billion yuan, and it personally incubated the new retail brand Hema.

Behind such a significant layout, Alibaba believes that the internet is increasingly becoming the infrastructure for social development, and the future trend of the retail industry is the integration of online and offline, with new retail being the new business model.

However, after years of attempts, this new retail experiment ultimately ended in disappointment, and Intime eventually faced the fate of being divested by Alibaba.

This is just one aspect of Alibaba's adjustment in layout. In fact, beyond Intime, Alibaba is actively selling many non-core businesses, including GaoXin Retail.

In March of this year, Lin Xiaohai resigned as CEO of GaoXin Retail and was reassigned within Alibaba. Lin Xiaohai became the CEO of GaoXin Retail in May 2021 and was considered a key figure in promoting the integration of GaoXin Retail and Alibaba. According to insiders, with the change of CEO, communication between the two companies has significantly decreased.

In October, GaoXin Retail announced a possible voluntary conditional offer, with its controlling shareholder Alibaba discussing the main terms of the potential offer with interested parties, and Alibaba is also in discussions with several other individuals.

At the same time, Alibaba has reduced or completely sold off numerous stocks, including Bilibili, hello Group, XPeng, and others. Hema has also been rumored to be for sale multiple times, and in March of this year, Hou Yi stepped down as CEO of Hema.

In past acquisitions, Alibaba displayed its big spending, and now, in selling businesses, Alibaba is also decisively cutting through the chaos, daring to sell, sell, sell.

Turning Point

As an internet giant, Alibaba has been somewhat preoccupied in recent years, with internet user growth peaking and consumption downgrading, catching Alibaba off guard.

With the rise of new forces like Pinduoduo, Douyin, and Kuaishou, Alibaba's market share has significantly dropped below 50%. As the former leader in the e-commerce industry, Alibaba has begun to realize that the market has changed.

As a result, Alibaba has launched a series of counterattacks. In March of last year, Alibaba initiated the largest structural split in its history, aimed at allowing its various businesses to independently face the market and improve competitiveness. In September of the same year, Joseph Tsai took over as chairman of Alibaba Group's board, and Eddie Wu became the Group CEO, completing the second institutional handover of management positions in the company.

This also brought a new strategic direction. In November 2023, Eddie Wu first disclosed Alibaba's new strategic blueprint, with three important priorities for the next decade: technology-driven internet platform business, AI-driven technology business, and a global business network.

Alibaba stated that for core businesses, it will maintain long-term focus and high-intensity resource and R&D investment, while for non-core businesses, it will realize the value of these assets through quick profitability or other forms of capitalization.

Clearly, Intime, GaoXin Retail, and others are not aligned with Alibaba Group's core strategic direction. In February of this year, Joseph Tsai revealed that by the first nine months of fiscal year 2024, Alibaba had completed the sale of 1.7 billion dollars in non-core assets "Our balance sheet still has some traditional physical retail businesses, which are not our core focus, so it is very reasonable to exit these."

As a result, Alibaba has begun to divest its previously acquired diversified assets, and the sale of Intime has sent a signal that the internet industry is shifting from diversified expansion to focused consolidation; that phase of rapid internet growth is ultimately in the past.

For Alibaba, the most important challenges now are breaking through e-commerce competition and international expansion. At the same time, with the acceleration of the AI era, Alibaba Cloud must seize this historic opportunity.

Currently, competition in the e-commerce market has extended from domestic to overseas, and Alibaba is seeking better response strategies. Recently, Alibaba has fully integrated its e-commerce businesses, including Taobao Tmall Group and International Digital Commerce Group, to establish an e-commerce business group, aiming to achieve greater growth through synergy.

On the Alibaba Cloud side, AI large model technology is still accelerating iteration. AI startups represented by Open AI and Zhipu have begun to accelerate their commercialization based on foundational models, while Alibaba Cloud, as an AI infrastructure, still needs to continuously prove its commercialization potential in AI.

Unlike the past decade, new retail is a strategic move for Alibaba to expand the incremental space of e-commerce. Today, Alibaba has placed e-commerce under a global perspective and incorporated AI into the company's core track, marking a new strategic upgrade.

An old era has passed. If Alibaba wants to become a good company that survives for 102 years, it needs to integrate into market changes with a zero-based mindset. This is a brand new challenge, and Alibaba must go all out