© Reuters. FILE PHOTO: A man walks past the Alibaba booth during the first China International Supply Chain Expo (CISCE) in Beijing, China November 28, 2023. REUTERS/Florence Lo/File Photo
By Julie Zhu and Kane Wu
HONG KONG (Reuters) -Chinese internet giant Alibaba (NYSE:) Group is looking to sell a number of consumer sector assets, including grocery business Freshippo and retailer RT-Mart, three sources with knowledge of the situation said.
The sale plan comes as Alibaba, under chairman Joe Tsai and newly appointed chief executive Eddie Wu, has shifted focus back to its core profitable e-commerce business model while divesting non-core, loss-making units, said one of the people.
Alibaba has been in talks with strategic and financial investors about these assets, said the sources, who declined to be named as the discussions were confidential. The assets also include shopping mall operator Intime, one of the sources said.
Discussions are at an early stage and Alibaba may decide not to proceed, the sources said.
Bloomberg reported on Thursday that Alibaba is considering selling InTime and has reached out to several firms to gauge their interest in acquiring its department store arm.
Alibaba, RT-Mart and Intime did not immediately respond to Reuters’ requests for comment.
A spokesperson for Freshippo denied that Alibaba was planning to sell the company and declined to comment further.
The divestment efforts also come amid Alibaba’s broad restructuring and China’s tightened scrutiny over initial public offerings in a already challenging capital markets that have hampered startups’ ability to raise funds.
Wu, who took office after predecessor Daniel Zhang stepped down in September, set out the company’s future strategy two months later, saying that each of its businesses would face the market more independently and that it would conduct a strategic review to distinguish between “core” and “non-core” businesses.
“With the change of Alibaba management, they are more focused on their core business, which is obviously domestic e-commerce, and they want to invest in more AI, cloud computing, and also overseas expansion,” said Jason Yu, greater China managing director of market research firm Kantar Worldpanel.
“These offline businesses do require a huge amount of effort and resources and it’s proven quite difficult to actually integrate with their core business, which is the online commerce business,” he said.
Alibaba announced a plan in March to split into six units and explore fundraisings or listings for most of them. It has since filed a Hong Kong listing application for the logistics arm Cainiao in September.
Freshippo, or Hema in Chinese, is a supermarket chain in China which also offers services such as dine-in and 30-minute home delivery. Launched in 2015, it has more than 300 stores in 28 cities, according to its website.
It was looking to list in Hong Kong last year but the plan was put on hold to better evaluate market conditions, Alibaba said in November.
In 2022, the grocery chain set out to raise funds at a valuation of about $6 billion, much lower than a hoped-for $10 billion. Freshippo has not announced the completion of the fundraising to date.
Alibaba invested $3.6 billion in 2020 to acquire a controlling stake in hypermarket operator Sun Art Retail Group (OTC:) Ltd, which runs RT-Mart, after buying a 21% stake in the company three years earlier.
The group expanded in China’s brick and mortar retail sector, as growth in e-commerce slowed, but that strategy has not translated into profits, one of the sources and analysts said.