Source: Sina Technology In 2023, 23-year-old Sam Altman (Sam Altman) spoke enthusiastically at the company's annual developer conference, praising the company's new app store for promoting his developed software (a friend positioning service called Loopt). "We think this is a new mobile era and we are excited to participate in it," Altman said. Today, 16 years later, Apple has invited this entrepreneur again - but the situation is different this time. Now the company needs his help, just as he needed Apple. Currently, the OpenAI startup run by Altman is at the forefront of the generative AI field. In order to catch up in this field, Apple has established a partnership with OpenAI to integrate ChatGPT into iPhone's operating system. Although the controversial Altman is unlikely to appear on stage at the press conference, this agreement will be the focus of next week's Apple Worldwide Developers Conference, indicating how much the power dynamics in Silicon Valley have changed in recent years. This agreement allows OpenAI to reach millions of Apple users, including those who may hesitate to use ChatGPT. For Apple, this collaboration brings the hottest technology of the artificial intelligence era - a chatbot with super powers that can be combined with its own services. Apple has been developing a series of artificial intelligence features, including features that run on its devices and other features that require cloud computing. Apple has also introduced artificial intelligence technology for the Siri digital assistant, but the company's self-developed chatbots have not yet met standards. Technology veteran Dag Kittlaus said that the collaboration with OpenAI is likely to be a "medium-term relationship" for Apple. Before Siri was acquired by Apple, he was co-founder and operator of Siri. "But one thing is certain, they will strive to cultivate their own capabilities in this regard. " On the morning of June 11th Beijing time, CEO Tim Cook will deliver a keynote speech at the Worldwide Developers Conference, which is considered the largest sales promotion of Apple in recent years. The company must convince consumers, developers and investors that Apple can thrive in the era of artificial intelligence. Due to the stagnation of Apple's existing businesses, five of its six quarters' revenue declined, and it faces greater pressure. In the field of artificial intelligence services, Apple once took the lead by releasing the Siri digital assistant in 2011, ahead of Amazon's Alexa and Google Assistant entering the market. But the company quickly fell behind its competitors, and the first appearance of ChatGPT in 2022 caused earth-shaking changes. In November 2022, OpenAI's chatbot inspired consumer imagination and prompted tech giants to compete to develop their own artificial intelligence services. Since then, Apple's main competitors have made progress. Gemini's chatbot is competing with ChatGPT for the dominant position in this emerging market. Microsoft is OpenAI's biggest supporter and has begun to integrate its AI-assisted Copilot into software. Amazon has also demonstrated an artificial intelligence-enhanced version of the Alexa voice assistant. In contrast, Apple has remained silent about its ambitions in artificial intelligence until now. Cook said last year that the company will act cautiously in new areas and will only add artificial intelligence technology on a "thoughtful basis." Recently, he believes that Apple will have an advantage in the field of artificial intelligence because the company can seamlessly integrate hardware, software and services together. Behind the scenes, Apple employees have been working hard to fulfill this promise. Before and after the release of ChatGPT, a small team in Apple's artificial intelligence and software engineering departments began using a framework called Ajax to develop ChatGPT's competitors. Apple software chief Craig Federighi urged managers to add as many artificial intelligence features as possible to the latest version of the iPhone and iPad operating system (internally referred to as "Crystal"). The service department led by Eddie Cue began to build the infrastructure of new data centers to support online artificial intelligence services. Employees also began researching how to apply artificial intelligence to Apple Music and the company's productivity applications.
Author: Yan Yan

On the evening of January 1, $BABA-W (09988.HK)$ an announcement was made, stating that the subsidiary and New Retail reached a Trade agreement with Dehong Capital to Sell all shares held for approximately HKD 13.138 billion (approximately RMB 12.3 billion). $SUNART RETAIL (06808.HK)$ This accounts for 78.7% of the issued shares of SUNART RETAIL.

Regarding this transaction, Alibaba stated that it will continue to focus on its core business and enhance shareholder returns. In September 2023, Alibaba Group established two strategic focuses: "user-centric and AI-driven," and stated that it would reorganize its business around these two focuses, reshaping the strategic priorities.

This divestment from SUNART RETAIL is also the second non-core asset that Alibaba has exited in half a month. On December 17, Alibaba reached a deal with Youngor Group to sell all its equity in InTime for approximately 7.4 billion yuan to a buyer consortium consisting of Youngor Group and members of the InTime management team.

It is worth noting that both SUNART RETAIL and InTime department store were sold off at a loss by Alibaba.

Media estimates suggest that Alibaba incurred losses of up to 37.262 billion Hong Kong dollars on the SUNART RETAIL deal. Adding the losses recorded from the low-price sale of InTime on December 17, which amounted to approximately 9.3 billion yuan, Alibaba's losses from these two capital operations reached as high as 44.3 billion yuan.

Low-price sell-off, Alibaba's loss amounted to 37.3 billion Hong Kong dollars.

SUNART RETAIL mainly operates chain supermarkets in mainland China under the brands "RT-Mart," "RT-Mart Super," and "M Membership Stores," and was once hailed as the "king of chain supermarkets."

In 2011, RT-Mart merged with Auchan Group to form SUNART RETAIL, and went public on the Hong Kong Stock Exchange that same year, with a market cap that once exceeded 100 billion Hong Kong dollars. Public information shows that Alibaba's earliest investment in SUNART RETAIL was in November 2017, when it invested approximately 22.4 billion Hong Kong dollars to acquire a stake in SUNART RETAIL, holding 36.16% of the company's shares directly and indirectly, becoming one of the important shareholders. Subsequently, the two parties cooperated to promote the implementation and exploration of the New Retail model, such as the launch of the RT-Mart Youxian App and the opening of unmanned convenience stores.

In October 2020, Alibaba further increased its investment in SUNART RETAIL, investing an additional 28 billion Hong Kong dollars, raising its stake to over 70%, becoming the controlling shareholder of the company.

With Alibaba's two investments firmed up, SUNART RETAIL ultimately sold for over 50 billion Hong Kong dollars.

However, with the passage of time, traditional supermarket formats have declined, and SUNART RETAIL's fluctuating profitability has also put considerable pressure and burden on Alibaba, even turning it into a losing investment.

Since 2018, SUNART RETAIL has recorded a revenue decline for over 5 years, with net losses appearing in the middle of the 2022 fiscal year; in the 2024 fiscal year, SUNART RETAIL's revenue was 72.567 billion yuan, down 13.3% year-on-year; it posted a net loss of 1.668 billion yuan attributable to the parent, the largest loss since its listing.

To cope with the decline in performance, over the past few years, RT-Mart has mainly reduced costs and increased efficiency through store closures, layoffs, and reduced expenditures. The earnings report shows that from the 2022 fiscal year (ending March 31, 2022) to the 2024 fiscal year (ending March 31, 2024), the number of employees at SUNART RETAIL shrank from 0.122 million to 0.0862 million, a nearly 30% reduction over two years.

In the earnings report released last February, Alibaba mentioned the decline in SUNART RETAIL's revenue, its shrinking scale, and impairment of intangible assets. Subsequently, in the earnings call, Alibaba Group's Board of Directors Chairman, Cai Chongxin, stated that the company's balance sheet still contains some traditional physical retail businesses, which are not core focus areas for the company, making the exit reasonable.

To this day, the market cap of RT-Mart's parent company, SUNART RETAIL, has dropped to just one-tenth of its peak, with Alibaba attempting New Retail for 50 billion Hong Kong dollars, eventually selling at a bargain price of 13.138 billion Hong Kong dollars.

"In the past decade, Alibaba has invested too many resources and energy into New Retail, with cumulative investments in offline sectors, including mergers, acquisitions, and ongoing operations, estimated between 150 billion to 200 billion yuan, and the result indicates that this Global Strategy has failed," said e-commerce expert and Dolphin Society founder Li Chengdong.

In his view, the past decade has been the era of Short Video, and Alibaba has almost missed this era. "Now it is certainly essential to return to the main business, to firmly eliminate non-core businesses, including RT-Mart, Silver Department Store and even Ele.me," Li Chengdong stated, "There is an urgency to sell off non-core assets, emphasizing focus on core business, essentially indicating that Alibaba's core business has been impacted by Douyin.$PDD Holdings (PDD.US)$The severe impact and influence have created a strong sense of crisis.

Has Alibaba changed course and strategically reduced its 'New Retail'?

Over the past year, Alibaba's New Retail Business has been turbulent.

Alibaba's New Retail global strategy layout is mainly through three methods: self-operated, shareholding, and strategic cooperation. The main self-operated entity is Hema, which has invested in Suning Cloud Business, Silver, SUNART RETAIL, Sanjiang Shopping Club, New Huadu Supercenter, and other retail anchors and offline supermarkets since 2015, and has strategically cooperated with companies like Bailian Da.

However, even with Alibaba's support, the transformation of Silver and SUNART RETAIL has not been smooth for Suning.$LIANHUA (00980.HK)$Sanjiang Shopping Club, New Huadu Supercenter, and others have all experienced varying degrees of losses or performance declines.

Regarding these former "strategic high grounds," Alibaba is reevaluating its business value. In 2024, Hema's founder Hou Yi stepped down, and since then, there have been frequent rumors about Hema being sold; Ele.me was rumored to suffer a significant loss selling to ByteDance, but the news was later refuted; Cainiao directly withdrew its IPO; SUNART RETAIL and Intime Department Store were sold off at a Low Stock Price...

"Alibaba explored the New Retail Global Strategy, which has been completed over the years. It was believed that facing bottlenecks online would lead to moving offline, but the results have not been as good as initially expected; instead, it has affected the development of online business," Li Chengdong said. "The core issue is still development; currently, the consensus is to develop AI and globalization, and the overall market environment perception has changed. Alibaba, lightening its load, finds it easier to firmly execute its strategic focus."

In September last year, Alibaba established two strategic focuses: "User First, AI Driven," and reorganized its business around these two focuses, reshaping its business strategy priorities. Alibaba CEO Wu Yongming once stated that the E-Commerce Business and Technology are the group's most critical development directions.

In the view of Zhuang Shuai, a guest advisor of the China Chain Operation Association and an expert in the Retail E-Commerce Industry, this does not mean that Alibaba's New Retail strategy is coming to an end.

"Alibaba Cloud remains the vanguard of Alibaba's exploration of New Retail. Alibaba Cloud's current development status is still very good. The arrival of new technologies like Tongyi’s large model will further activate the digitalization of New Retail. Meanwhile, Alibaba is no longer constrained by SUNART RETAIL and Intime, allowing it to cover more retail enterprises, supermarkets, and department stores in the future, providing more comprehensive services and product development for the entire industry," Zhuang Shuai said.

Mo Daiqing, a senior Analyst of the E-Commerce Research Center at Wangjing Society, stated that Alibaba's sale of SUNART RETAIL and Intime Department Store does not necessarily mean abandoning its "New Retail" strategy, as it still owns retail formats like Hema Fresh and Tmall Supermarket. However, Alibaba is gradually divesting from businesses that are less correlated with its main operations or are in the stage of exit, optimizing its asset structure and enhancing operational efficiency through the sale of non-core assets.

In 2024, against the backdrop of focusing on its main business, Alibaba intensively reduced its shareholding in invested businesses and sold non-core assets. Aside from New Retail formats, Alibaba's previous "moves" in various fields have been affected to varying degrees.

Specifically includes: Shareholding.$GOGOX (02246.HK)$Shareholding reduced from 14.97% at the time of listing to less than 5%; completely offloaded.$Bilibili (BILI.US)$Some Shareholding, cashed out 0.3578 billion yuan; multiple Sell-offs.$NETEASE MUSIC (09899.HK)$Shares; multiple Sell-offs.$XPeng (XPEV.US)$Shareholding; by the end of November, Alibaba also intends to completely offload its stake in Shanghai Lily&Beauty Cosmetics...

An E-Commerce industry practitioner stated that Alibaba can obtain a large amount of funds by clearing old Assets, which can then be invested in more promising projects, betting on the future "Shanghai New World."

Editor/rice