Alibaba is selling its Chinese department store chain Intime to a consortium including the current management. The tech conglomerate wants to refocus on its core business, e-commerce, and is willing to take a loss of 1.2 billion euros to do so.
Focus on core activities
The sale is estimated at 7.4 billion yuan (just under a billion euros), which is not even half the 2.2 billion euros Alibaba paid for Intime in 2017 – ironically, in an attempt to strengthen its position in the offline retail market.
The decision to divest Intime is part of a wider restructuring at Alibaba. Last year, the company already split into six separate business units. The focus is also shifting back to e-commerce, where Alibaba is bracing for fierce competition from price-fighters such as Temu and platforms Douyin and TikTok.
The sale was also prompted by the challenging market conditions in China’s retail sector: consumer confidence remains weak, putting pressure on both physical retailers and e-commerce companies. Jianggan Li of consultancy Momentum Works told Reuters that Alibaba currently lacks the resources and focus to manage offline retail effectively.
End of ‘New Retail’?
The sale of Intime also symbolises the demise of the ‘New Retail’ concept, introduced by Jack Ma. This model, which wanted to combine e-commerce and physical shops, proved to be (too?) expensive due to high rental and labour costs and the complexity of system integration. In addition to Intime, Alibaba is also considering selling its stakes in supermarket chain Freshippo and retailer RT-Mart, Reuters reported earlier this year.
With this strategic change of direction, Alibaba is fully committed to digital platforms, both in China and internationally. Chairman Joe Tsai previously stressed that divesting non-core businesses makes sense, although challenging market conditions continue to complicate sales. The restructuring should enable the group to operate more efficiently and compete more strongly in a saturated market.
