After eight years of layout, Alibaba began to adjust its new retail layout.
Since December 2023, multiple physical retail listed companies affiliated with Alibaba have announced that Alibaba and Taobao have successively transferred their equity holdings in retail companies to a Hangzhou Haoyue Enterprise Management Co., Ltd. The list includes companies such as Suning.com, Macalline, Beauty Beauty, and Fantastic Home.
Recently, there were reports that Alibaba plans to sell RT Mart and Hema to a large grain, oil, and food enterprise group, and details such as valuation have been revealed. Both RT Mart and Hema have denied this. In February of this year, according to 21st Century Business Herald, there were reports that Alibaba Group was considering selling Intime Commercial recently, but neither Alibaba nor Intime Commercial responded to this.
RT Mart, Hema, and Intime Commercial are important puzzles under Alibaba's new retail strategy. In 2016, Jack Ma proposed that the era of pure e-commerce will soon come to an end. In the next ten or twenty years, there will be no e-commerce, only new retail. His definition of "new retail" is the digital reconstruction of "people and goods yards" through the close integration of various commercial links such as online, offline, and logistics.
In Alibaba's new retail system, Alibaba Cloud, Cainiao and Alipay are the underlying infrastructure, while Taobao and Tmall are the bases. On this basis, Alibaba has invested in a series of physical retail enterprises, including Intime Commercial, which specializes in clothing and department stores, Hema Fresh, which specializes in fresh produce, Suning Yigou, which specializes in home appliances and digital products, Gaoxin Retail (06808. HK), which has a large chain of mass selling supermarkets such as RT Mart, and Surprise Home (000785. SZ), which specializes in home furnishings and home decoration, forming eight major business teams.
The new retail business has contributed a lot of intangible value to Alibaba. Zhuang Shuai, founder of Bailian Consulting, pointed out to Time Finance that Alibaba's investment and acquisition of Intime Commercial have enabled many brand merchants, especially high-end clothing brands, to access the early Taobao shopping mall. The brand resources and supply chain system of Gaoxin Retail also contribute significantly to the development of Tmall Supermarket.
On the other hand, in recent years, factors such as e-commerce have impacted offline channels, and the financial returns of Yintai Commercial and Gaoxin Retail have not been very good.
In November 2023, Wu Yongming, CEO of Alibaba Group, said that Alibaba will have three important priority directions - technology driven Internet platform business, AI driven technology business, and global business network. The company will invest more resolutely and make more decisive choices.
At Alibaba's Q3 2024 financial report conference call, Alibaba Group Chairman Cai Chongxin admitted that the company still has some traditional physical retail business on its balance sheet, which is not the core focus of business. The company's exit is also reasonable, but considering market conditions, the exit may take time to achieve.
The transformation sample of Yintai Commercial
Yintai Commercial was founded by Shen Guojun, covering various formats such as department stores and shopping centers, and has over a hundred projects nationwide. The company is also the first offline business carrier of Alibaba's new retail strategy.
Shen Guojun has a close personal relationship with Jack Ma. Shen Guojun once said that he met Jack Ma on a plane around 2005. Afterwards, the two jointly initiated the establishment of the Yunfeng Fund; In 2013, Alibaba led the establishment of Cainiao Network, with Intime investing 1.6 billion yuan to become the second largest shareholder, Jack Ma serving as the company's chairman, and Shen Guojun as the CEO; Shen Guojun also invested in Ant Financial's e-commerce bank. In 2015, under the planning of Jack Ma, the Zhejiang Merchants Association was established, with Jack Ma serving as the president. Shen Guojun stood beside Jack Ma at the establishment ceremony.
In 2014, Alibaba invested HKD 5.3 billion to become the second largest shareholder in Intime. In 2017, Alibaba announced the privatization of Intime Commercial, a wholly-owned company jointly owned by Shen Guojun, with a transaction amount of HKD 19.8 billion, a premium of 42% compared to the last trading day before the suspension. According to the announcement. After privatization, Alibaba will become the controlling shareholder of Intime Commercial, with an expected increase in shareholding to about 74%.
Zhuang Shuai analyzed Time Finance and Economics and stated that at that time, Yintai Commercial had a significant influence in the commercial real estate field. Alibaba's investment in Intime has driven a large number of brands to settle in the early Taobao shopping mall.
He said that nowadays, various luxury goods can be purchased on Taobao and Tmall, with great assistance from Intime. "Luxury goods place more emphasis on offline high-end channels, and if Alibaba talks about it itself, it may not even be able to see the face of luxury brands.".
Zhuang Shuai pointed out that Alibaba has provided significant assistance to the digital transformation of Intime Business and the implementation of the real-time retail model. Both parties have collaborated to launch O2O products represented by Meow Street, Meow Goods, and Meow Customers.
Among them, Meow Street is a shopping mall platform app that mainly provides consumers with information about surrounding shopping malls and their brand stores through cooperation with shopping malls, and provides one-stop food, drink, and entertainment navigation services. Consumers can instantly view nearby discount information, push product discount information, find stores through indoor navigation, make payments, queue up for dining, park and find cars, and share their shopping experience in real time.
Meow Goods digitizes the offline counter products of Intime and connects them with online payment platforms. Consumers can choose to pick them up at the mall counter or mail them home. Meow customer is a WeChat sales platform under Intime. Salespeople in department stores can use Meow to recommend products to customers.
The management team of Yintai Commercial once stated that after digital transformation and upgrading, Yintai Department Store has become a technology department store with a comprehensive architecture on the cloud and highly integrated online and offline.
Yintai Commercial CEO Chen Xiaodong has publicly stated that on Double 11, the number of people browsing Yintai online has exceeded the number of people browsing Yintai stores offline. Now many customers are used to mailing home directly from the store. Without the Internet infrastructure at the bottom of the novice e-face, even if there is a lot of business, it is difficult to deal with it.
"With Meow Street, Intime will become the first department store to cover the world without closing." In 2019, Chen Xiaodong proposed that in five years, the proportion of Intime department store's online and offline sales should reach 1:1. He said that Yintai will create 1000 new retail brands with doubled floor area efficiency, 100 new retail products with annual sales of millions, and 100 new retail sales guides with annual revenue of millions.
Yintai Commercial has been privatized, making it difficult for outsiders to glimpse its financial situation. In recent years, factors such as e-commerce have had an impact on the physical retail industry, and Intime Commercial may find it difficult to stand alone.
The "Development Index of Large Retail Enterprises" released by the China Department Store Business Association for the third quarter of 2023 shows that the operating income index of large retail enterprises was 1242 points, a decrease of 0.5% compared to the previous quarter.
In terms of Yintai Business, the sales performance of its projects varies. Among them, Hangzhou Hubin Yintai in77 Shopping Center performed the best, with sales exceeding the 10 billion yuan mark for the first time in 2023, a year-on-year increase of 30%. However, Wulin Yintai, as the earliest commercial store of Yintai, has experienced a decline. According to statistics from Lianshang Net, its sales revenue in 2021 and 2022 were 6 billion yuan and 5.8 billion yuan respectively. According to the monitoring of Xinshan.com, the sales revenue of this project is expected to exceed 5 billion yuan in 2023.
"For offline department stores, digital transformation is not as important. Beijing SKP has done very little digitalization, but business is also doing extremely well." Zhuang Shuai told Time Finance analysis that the main factors that determine the "life and death" of offline department stores are project location, product richness, price advantages, and customer trust.
In its view, some projects under Yintai Commercial have performed poorly, mainly due to fierce competition in the surrounding areas. He gave an example that after the opening of the third phase of Beijing Guomao, the sales of Guomao Yintai Center have declined. At Wangfujing Street in Beijing, Yintai's project performance is average, mainly due to the presence of Wangfujing Department Store and the high-end shopping mall APM developed by Sun Hung Kai.
The Expansion and Bottlenecks of New Retail
With the advancement of the new retail strategy, Alibaba subsequently invested in enterprises such as Suning, Sanjiang Shopping, and Lianhua Supermarket. In November 2017, Alibaba announced that it would invest HKD 22.4 billion in the parent company of RT Mart, Gaoxin Retail, and directly and indirectly hold 36.16% of the latter's shares.
In Zhuang Shuai's view, similar to the acquisition of Intime Commercial, Alibaba's investment in Gaoxin Retail has filled the gaps in Tmall Supermarket's supply chain. After Alibaba's investment, it also carried out digital transformation of Gaoxin Retail.
For example, Alibaba has set up self-service cash registers in various stores of RT Mart, which are connected to Taoxianda's business; Carry out digital transformation of members; Upgrade Feiniu.com to an APP format and upgrade it to "RT Mart Fresh", providing free shipping for over 29 yuan and 1-hour express delivery service; For some stores with over 1000 orders, renovate the hanging chain and set up front warehouses. In addition, in 2019, RT Mart and Tmall Supermarket shared their inventory. In 2021, RT Mart and Cainiao deepened their cooperation and entered the community group buying market.
From the financial report of Gaoxin Retail, although there has been significant growth in online channels, it is not enough to fully offset the decline in offline channels.
In the fiscal years 2021, 2022, and mid-2023, Gaoxin Retail's revenue was RMB 88.13 billion, RMB 83.66 billion, and RMB 35.77 billion, respectively. The company's owner's attributable profit was RMB -739 billion, RMB 109 million, and RMB -359 million, respectively.
Gaoxin Retail has previously stated in its announcement that the reasons for the mid year 2023 loss include the contraction of its supply chain business (including Tmall's shared inventory and Taocai business), lower than expected performance, and increased discount promotions leading to a decrease in sales profits.
Zhuang Shuai observed and analyzed that Alibaba's development process can be divided into three stages. Firstly, Jack Ma founded Taobao and Tmall, and led Alibaba to become the leader of the e-commerce industry. Before and after Zhang Yong took over Jack Ma, in order to cope with the pressure of the end of the Internet traffic dividend and improve Alibaba's moat, Alibaba launched a 100 billion yuan acquisition period, collecting dozens of large and small enterprises, such as Youku, Xiami Music, Wanwang, Gaode Maps, Elema, Yintai and RT Mart. Now, Alibaba has reached a crossroads of contraction.
From the outside world's point of view, the development of Internet companies needs boundaries, whether from the perspective of business logic or from the perspective of regulation. If the stall is too large, it will pose significant challenges to business collaboration, talent team building, and other aspects.
In December 2020, the State Administration for Market Regulation announced that, according to the Anti Monopoly Law, the Administration for Market Regulation had investigated the illegal implementation of concentration of operators by Alibaba Investment Co., Ltd. in its acquisition of equity in Yintai Commercial (Group) Co., Ltd. without lawful declaration, and imposed an administrative penalty of 500000 yuan on Alibaba Investment Co., Ltd.
Concentrated equity packaging
On March 28, 2023, Alibaba announced plans to establish six major business groups (Cloud Intelligence Group, Taobao Tmall Business Group, Local Life Group, International Digital Business Group, Cainiao Group, and Da Wen Yu Group) and other business companies.
Under the new organizational structure and business priorities, the equity transfer work of Alibaba's participating companies has begun.
In December 2023, Yuantong Express (600233. SH), Macalline (601828. SH), Liren Li Makeup (605136. SH), Meinian Health (002044. SZ), Focus Media (002027. SZ), Qianfang Technology (002373. SZ), and surprisingly home announced that Alibaba (China) Network Technology Co., Ltd. (referred to as Alibaba Network) Transferred its shares in the above-mentioned listed company to Hangzhou Haoyue Enterprise Management Co., Ltd. (referred to as "Hangzhou Haoyue").
The above seven companies have all announced that the relevant equity changes are "in order to achieve the independent development of Alibaba Network's main and non main businesses, each performing its own duties, improving operational efficiency, further realizing the preservation, appreciation, and sustainable development of assets, and building a competitive enterprise, Alibaba Network has decided to implement a survival separation and split into Alibaba Network (the surviving company) and newly established companies Hangzhou Haoyue, Chuanbin Technology, and Chuanhang Technology."
In the same month, Hong Kong listed company Huitongda Network (09878. HK) announced that Alibaba Network would transfer all 18.87% of its domestic shares to Hangzhou Haoyue.
In March of this year, ST Easy Buy (002024. SZ) announced that its shareholder Taobao (China) Software Co., Ltd. had transferred all 19.99% of its company shares to Hangzhou Haoyue, and the transfer registration procedures had been completed.
ST Yigou disclosed in its simplified equity change report that the equity transfer was made based on the latest organizational structure of Alibaba Group, combined with the correlation between Alibaba Group's investment in Suning Yigou and the adjusted organizational entity of Alibaba Group.
Alibaba's intention to shrink is clear. Zhuang Shuai speculates that in addition to the overall sale, Yintai Commercial and RT Mart may also be sold separately. Regional retail giants or real estate developers in urgent need of transformation may choose to acquire profitable regional stores. Foreign retail giants may consider purchasing some well located stores to transform into new formats such as warehouse member stores and continue operating. Long term loss making stores are likely to be closed.
No matter who the acquirer is, both Yintai Commercial and Gaoxin Retail need more changes to overcome the current difficulties.