China’s leading e-commerce giant is scaling back its brick-and-mortar operations. Intime’s department store chain will be sold to the textiles and apparel company Youngor Fashion for 7.4 billion yuan ($1.02 billion), as the company refocuses on its core e-commerce business. The decision comes amid growing competition from Chinese rivals like Pinduoduo and ByteDance.
Alibaba said the sale will give it more flexibility to invest in online retail, logistics, and cloud computing and help it cut costs by focusing on those core businesses. The company also integrates its domestic Chinese and international e-commerce operations under a single leadership team, even as it scales back other business units. The company’s stock has fallen more than 20% this year as investors worry about a slowdown in the Chinese economy, heightened regulatory pressures, and competition from other tech giants such as Tencent Holding Ltd.
Despite the sale of some of its brick-and-mortar businesses, Alibaba will continue to expand its global footprint. It is raising a $5 billion dual-currency bond and plans to make more investments abroad as it competes with Amazon.com Inc. and other foreign retailers.
In recent years, China’s government has been stepping up its efforts to control fast-growing technology companies. The Communist Party is especially worried about the dominance of e-commerce giants such as Alibaba and Tencent, which are behind Asia’s most popular messaging service and operate a vast internet empire.
China’s regulators target the barriers that Alibaba and other tech giants have built as first-mover advantages in the Internet commerce sector, such as forcing merchants into exclusive cooperation pacts with one platform over another. Beijing is also seeking to tear down monopoly power in the fintech sector, with new rules set to require lenders and fintech firms to use public data to score potential borrowers rather than proprietary information that can only be shared internally.
Those rules could dent Alibaba’s lending business and erode its market share in the lucrative fintech space. Although Alibaba says it will comply with any new regulations, the company will likely be forced to change its credit scoring algorithms and other practices.
In other news, Alibaba said it had received an order from the Ministry of Finance to transfer ownership of its majority stake in a securities firm to state-owned investment firm Hillhouse Investment Partners. The investment is part of the country’s efforts to consolidate its financial markets, and the move will help the ministry regulate capital flows more effectively.
The investment firm will purchase Alibaba’s 78.7% share for HK$12.298 billion, or about $1.6 billion. The other 11% is held by shareholders, including the Hong Kong-listed e-commerce giant’s private equity arm. The sale will allow Alibaba to concentrate fully on its core business and enhance shareholder return, the company said.