Freshippo, Alibaba’s supermarket chain, has reportedly achieved four consecutive months of profit for the first time after a major restructuring of its operations. The brand has been the subject of persistent rumors that it would be sold off following the postponement of its proposed IPO last November, but recorded profits from March to June this year.

Why it matters: The performance comes on the back of significant cost-saving efforts, including downsizing and layoffs, in Alibaba’s grocery business. The company is positive that it could also be a sign of sustained profitability.

Details: In March, former CEO Hou Yi left Freshippo, the company that he founded nine years ago, with chief financial officer Yan Xiaolei taking on the CEO role. 

• According to Alibaba’s annual report, Freshippo exceeded RMB 59 billion ($8.2 billion) in total GMV in the fiscal year ending March 31, 2024, RMB 4 billion more than the previous year. Online transactions contributed over 63% to the chain’s GMV.
• A Wednesday LatePost report cited Yan as saying that the company aims to reach an annual GMV of RMB 100 billion in three years. “By then, Freshippo will have become one of the top retailers in China, and going public will be a natural step,” Yan was quoted as saying.
• In April, Freshippo resumed its Membership Activation and Renewal service, six months after the sudden suspension of the value-added campaign, and began a range of discount-oriented reforms. The original changes had caused dissatisfaction among members, as non-members were able to receive a general 20% discount by shopping in-store, whereas previously members enjoyed an exclusive 12% discount.
• Since its founding, Freshippo has experimented with various retail formats, including the membership store Hema X and convenience store-like Hema Mini, in an attempt to set itself apart from rival Sam’s Club, which focuses solely on paid membership. The LatePost report mentioned that Freshippo is planning to open 300 new discount stores before next March as it seeks expansion in lower-tier markets.

Context: Freshippo was one of three businesses originally planned to be the first to go public under Alibaba’s massive restructuring that split the tech giant into six units. But plans for an IPO were put on hold as a downturn in China’s consumer market impacted the brand’s slumping valuation.

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