Source | New Retail Following the divestiture of Intime and Sun Art Retail, Alibaba has made a new move in exiting traditional physical retail. On April 21, Sanjiang Shopping Club Co., Ltd. (601116.SH, "Sanjiang Shopping") announced that Hangzhou Alibaba Zetai Information Technology Co., Ltd. ("Alibaba Zetai") plans to reduce its shareholding in the company by no more than 16.43 million shares, or no more than 3% of the company's total share capital, through centralized bidding and block trades, during the period from May 16, 2025 to August 15, 2025. Based on Sanjiang Shopping's closing price of 11.81 yuan per share on April 22, the value of the shares Alibaba Zetai intends to reduce is approximately 194 million yuan. After the reduction, Alibaba remains the second largest shareholder Sanjiang Shopping also issued risk warnings in the announcement: first, the implementation of this reduction plan is uncertain as Alibaba Zetai will decide whether to proceed based on its own circumstances, market conditions, and the company's stock price; second, Alibaba Zetai is not the controlling shareholder or actual controller of the company, and the implementation of this reduction plan will not affect the company's ongoing operations. Since making a significant investment in Sanjiang Shopping in 2016, the Alibaba system has firmly held the position of second largest shareholder, and the market has continuously expected potential asset integration between the two parties. However, with this first announced share reduction in nine years, expectations for asset integration have cooled, and further actions cannot be ruled out in the future. After the reduction, Alibaba Zetai remains the second largest shareholder of the listed company, while Shanghai He'an Investment Management Co., Ltd. remains the largest shareholder with a 35.42% stake, and all other shareholders hold less than 5%. Chen Nianci holds 80% of Shanghai He'an and is the actual controller of that company. Data source: Sanjiang Shopping 2023 Annual Report Alibaba accelerates exit from traditional physical retail According to public information, Alibaba Zetai's investment in Sanjiang Shopping dates back to 2016. That year, Jack Ma first proposed the concept of "New Retail" at the Yunqi Conference, stating that data and technology would be used to reconstruct "people, goods, and scenes" to achieve full-channel integration of online and offline. Around this strategy, the Alibaba system initiated multiple key layouts, including investing in Sanjiang Shopping, launching Hema Fresh, and privatizing Intime Commercial. As a key step in business transformation, the Alibaba system spared no effort in investing in the "New Retail" strategy. Taking the investment in Sanjiang Shopping as an example, Alibaba Zetai acquired 32% of the listed company's shares through private placement subscription and agreement transfer, with a total investment of 1.96 billion yuan, equivalent to a comprehensive cost of approximately 11.19 yuan per share. In the following years, Sanjiang Shopping began to introduce internet thinking and perspectives, leveraging Alibaba's mature experience in e-commerce platform operations to accelerate the integration of physical and internet operations, achieving a strategic upgrade of its business. It carried out a series of initiatives, including creating New Retail 1.0 stores, platform-based online operations, digital management of food safety, deepening the product supply chain, and establishing an innovation and R&D center. Through Sanjiang Yuncai and Taoxianda, Sanjiang Shopping also connected to various home delivery platforms, achieving unified management and fulfillment of online business across all channels through a single online middle platform and a single operating system. In terms of store cooperation, on January 18, 2017, the first Hema store in Ningbo, Yongjiang Store, opened, and Sanjiang Shopping began to engage in Hema Fresh business; subsequently, Sanjiang Shopping operated Hema Fresh stores in the Ningbo area, continuously exploring and advancing the development of the New Retail model. After several years of development, by 2021, the Ningbo Hema Fresh stores operated by Sanjiang Shopping had emerged from the "innovation pilot period," with a certain improvement in operational efficiency. In April 2022, Sanjiang Shopping mentioned in its board report that in 2021, the company had achieved results in upgrading New Retail stores, with the Ningbo Hema Fresh stores operated by Sanjiang Shopping achieving profitability for four consecutive months. During the nine years of Alibaba's shareholding, Sanjiang Shopping's revenue remained stable at around 4 billion yuan, with slight fluctuations in profit and profit margins. However, as a regional retailer, considering the impact of the economic situation, Sanjiang Shopping's overall performance has been relatively stable and healthy. Data source: Sanjiang Shopping's financial reports over the years Of course, for a long time, Alibaba Zetai's investment in Sanjiang Shopping has been viewed more as a strategic investment, and the market has always had expectations that Alibaba's supermarket assets would be injected into Sanjiang Shopping. At that time, there were voices in the industry that Alibaba was planning to introduce its AI giant Megvii Technology into Sanjiang Shopping to create an "AI + Retail" super platform. It was said that Megvii Technology, as one of China's "AI Four Little Dragons," if its visual recognition and intelligent warehousing technologies were deeply integrated with Sanjiang Shopping's fresh food supply chain, would completely revolutionize the efficiency of traditional retail. However, with the news of the share reduction, whether the above layout can be successfully implemented is uncertain. For Alibaba, the reduction plan may be related to its continuous optimization of its investment portfolio and dynamic adjustment of its retail layout in recent years. In the past two years, Alibaba has gradually exited some traditional physical retail businesses, shifting focus to its core self-operated businesses, AI large models, and overseas market expansion. As a regional supermarket, Sanjiang Shopping's synergistic value in Alibaba's "Big Tmall" integration strategy has declined compared to the past. Although it remains the second largest shareholder of Sanjiang Shopping, judging from Alibaba's business shift, the New Retail ambition that once led to its investment in Sanjiang Shopping is no longer present. This is not the first time Alibaba has exited the traditional retail sector. On December 17, 2024, Alibaba sold 100% of Intime's equity to a consortium composed of Youngor Group and members of Intime's management team. According to the announcement, Alibaba's total proceeds from the sale of Intime were approximately RMB 7.4 billion (US$1 billion). On January 1, 2025, Alibaba Group announced that its subsidiary and NewRetail reached a transaction with DCP Capital to sell all of its shares in Sun Art Retail for up to approximately HK$13.138 billion (RMB 12.35 billion), accounting for 78.7% of Sun Art Retail's issued shares. The sale and purchase agreement was completed in Hong Kong on February 27. These two sales also brought Alibaba nearly RMB 19.75 billion in cash flow. For Alibaba, divesting traditional retail businesses first allows it to recover funds. Currently, Alibaba's strategic priorities are changing. The successive sales of Intime Department Store and Sun Art Retail are considered opportunities for Alibaba to monetize non-core assets, and the proceeds can be used to focus more on core business development and enhance shareholder returns. At the same time, traditional retail businesses face growth bottlenecks, such as the impact of e-commerce on hypermarket formats and rising operating costs. Divestiture can reduce performance pressure, optimize financial reports, concentrate resources on core e-commerce, cloud computing, AI, and other potential sectors, and accelerate technological iteration. For the divested businesses, independence allows them to escape the impact of Alibaba's strategic adjustments, flexibly formulate development strategies, attract new investors to bring funds and resources, and support business innovation and transformation. Taking RT-Mart as an example, although it underwent digital upgrades after being acquired by Alibaba, the industry's downward pressure remained significant. DCP Capital has accumulated rich industry experience and a deep understanding of successful models of different retail enterprises through its investments in many companies. Its investment can help RT-Mart learn from the successful experiences of excellent enterprises, explore a development path suitable for RT-Mart, and hopefully help it rejuvenate in the complex and changing retail market. After Alibaba's reduction, Sanjiang Shopping can also reduce strategic synergy constraints, independently plan its business based on its regional market characteristics, such as expanding local supply chain cooperation and optimizing store layout, thereby improving operational autonomy and efficiency. Sanjiang Shopping deeply cultivates the Zhejiang regional market Sanjiang Shopping is a large commercial circulation enterprise in Zhejiang Province, founded in 1995. Founder Chen Nianci once served as deputy director of the Finance and Trade Office of Ningbo Municipal Government. In 1994, he was transferred by the organization to help work at a foreign-funded large chain enterprise; the following year, to open community discount supermarkets, Chen Nianci left the foreign company and founded Sanjiang Shopping. Adhering to the philosophy of "spend less, live better," it primarily operates community discount supermarkets. Since 2000, Sanjiang Shopping has been continuously selected for the Top 100 Chinese Chain Retail Enterprises; in March 2011, Sanjiang Shopping was successfully listed on the Shanghai Stock Exchange, further enhancing its capital strength and market influence. Image source: Xiaohongshu In the "2023 China Chain Top 100" list released by the China Chain Store & Franchise Association on June 6, 2024, Sanjiang Shopping Club ranked 87th with sales of 4.158 billion yuan and 209 stores (list data). Sanjiang Shopping insists on layout within Zhejiang Province, focusing on expansion in the Ningbo area. As a key circulation enterprise of the provincial government and a base for emergency supply of goods in Ningbo, Sanjiang Shopping has always insisted on 100% safety testing of edible agricultural products, accumulating a good industry reputation; consistent integrity management has given the company a relatively stable customer base. According to Sanjiang Shopping's 2024 semi-annual report, as of the reporting period, Sanjiang Shopping had developed 198 stores, with approximately 940,000 highly loyal members. Sanjiang Shopping demonstrates multiple operational characteristics, occupying a unique position in the local retail market: First, Sanjiang Shopping precisely focuses on communities. Sanjiang Shopping's main business formats include community stores, Hema stores, and neighborhood stores, firmly targeting community residents as its core customer group. Store locations are close to communities, often near residential areas and vegetable markets, providing great convenience for residents' daily shopping and building a "shopping station at the doorstep." Image source: Dianping netizens In terms of categories, Sanjiang Shopping has significant advantages in fresh food operations. Since 2018, Sanjiang Shopping has fully transformed from community discount supermarkets to fresh food discount supermarkets, making fresh food categories the operational focus. Fresh products are placed in prominent positions in stores, emphasizing the concept of "safe, fresh, healthy, and affordable," and striving to create a "supermarket-style vegetable market"; Sanjiang Shopping also enhances the richness of ready-to-eat, ready-to-heat, and ready-to-cook prepared foods through fresh food processing centers and central kitchens; in procurement, it works closely with many high-quality fresh food suppliers to control quality and freshness from the source; in warehousing and distribution, Sanjiang Shopping has a complete cold chain logistics system to ensure fresh products are delivered to stores quickly and reduce loss. Image source: Dianping netizens Sanjiang Shopping has a rich selection of private label products. These products are strictly screened and labeled with the "Sanjiang Shopping" brand. Compared to similar well-known products, prices are typically 20%-30% cheaper, and while ensuring quality through strict dual supervision, they have won customer praise and also brought differentiated competitive advantages. After the baptism of the New Retail stage, Sanjiang Shopping's omni-channel integration development has also performed well. Leveraging Alibaba's New Retail concepts and technology, Sanjiang Shopping's online platform has been continuously optimized and upgraded, and offline stores have incorporated digital elements such as electronic price tags and self-checkout, enhancing the shopping experience. Online order volume has multiplied during the integration process, achieving omni-channel sales and meeting consumers' diverse shopping preferences. As of September 2024, Sanjiang Shopping's total operating revenue for the first three quarters was 2.971 billion yuan, up 0.12% year-on-year, and net profit attributable to the parent was 121 million yuan, up 15.83% year-on-year. By single quarter, the third quarter's total operating revenue was 1.008 billion yuan, up 3.24% year-on-year, and the third quarter's net profit attributable to the parent was 43.3305 million yuan, up 154.77% year-on-year (the growth in net profit attributable to the parent was due to increased government subsidies and reduced expenses during the reporting period). In the future, Sanjiang Shopping is expected to further deepen its cultivation of the Zhejiang regional market and enhance its competitiveness in the local retail market, leveraging its deep roots in the community fresh food supermarket sector, unique operational characteristics, and the flexibility brought by independent business planning. After divesting traditional retail businesses, Alibaba can devote more resources and energy to core businesses such as e-commerce, cloud computing, AI large model R&D, and overseas market expansion, accelerating its layout and development in these high-growth potential areas. Alibaba's reduction of its stake in Sanjiang Shopping is a retreat of capital and a sign of the new retail industry moving from frenzy to pragmatism. The future direction of both companies deserves continued industry attention, and their exploration and practice in their respective new directions may bring new insights and thoughts for the development of the entire retail industry.