Alibaba is changing its strategy: Sun Art hypermarket sales show a return to online roots

Chinese e-commerce giant Alibaba Group Holding Ltd. has decided to sell its majority stake in Sun Art Retail Group Ltd. to investment fund DCP Capital. The move is further evidence of the company's strategic shift towards strengthening its core focus on online business and technology.

Alibaba $BABA, an e-commerce pioneer in China, said it may raise up to HK$12.3 billion (US$1.6 billion) from the sale of its more than 70% stake in Sun Art, a Costco-like hypermarket chain. However, this amount is significantly lower than the $3.6 billion Alibaba paid to double its stake in Sun Art in 2020. Sun Art's current value is around $3 billion, even though the company's market value has risen more than 80% in the past 12 months.

The sale of this stake accelerates Alibaba's retreat from physical retail, an initiative led by former CEO Daniel Zhang. Under the new leadership of Eddie Wu, Alibaba is focusing on key areas such as cloud technology, online marketplaces and international expansion. For example, through a new joint venture project, the company is looking to accelerate its entry into the Korean market.

Under the leadership of Jiang Fan, who now runs both domestic and international e-commerce operations, Alibaba continues to divest assets that are not core to its core strategy. In a statement, the company said the sale of its stake in Sun Art is "an opportunity to monetize non-core assets" and the funds will be used to further develop its core business and increase returns for shareholders.

A return to its roots

The sale of Sun Art comes just a month after Alibaba agreed to sell its Intime Fashion chain to Youngor Fashion Co. for about $1 billion. The sale marked a loss of 9.3 billion yuan ($1.3 billion) on the original investment. The Sun Art acquisition was similarly loss-making, which ultimately contributed to Alibaba's decision to focus on its technology and online businesses.

Experts at Bloomberg Intelligence point out that Alibaba's decision to focus on technology, artificial intelligence and global e-commerce is key to its plans for 2025. Proceeds from sales of physical retail chains can be used for share buybacks and dividends next year.

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