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Dec. 25 (NBD) – Alibaba Group announced Monday that the operation of its fresh food business on Tmall Supermarket will be transferred from fresh produce e-commerce site Yiguo to Alibaba's new retailing arm Hema Xiansheng (Hema), marking a strategic upgrade within the grocery sector of the e-commerce giant.

After the adjustment, Yiguo will pivot to business to business (B2B) services, empowering the retailing and food & drink sector within Alibaba's ecosystem including Hema Fresh, RT-Mart, Tmall Supermarket fresh food, and food ordering platform Ele.me. 

Jin Guanglei, co-founder of Yiguo Group, emphasized at a press conference in August this year that Yiguo had long turned from a vertical e-commerce platform of fresh food to an operating platform that covers the whole chain of fresh food industry. 

Hema, the poster child of Alibaba's new retailing endeavor, aims to integrate online and offline retailing services, which forms a basis for taking over the fresh food sector of Tmall Supermarket. Besides, Hema Fresh has advantages at the purchasing and supply side of fresh food retailing, which are expected to boost relevant businesses on Tmall Supermarket.

The fresh food sector is considered as the "last blue ocean" in e-commerce, and attracted many retailing enterprises to compete for market share. According to a report released by Shanghai Shangqing Information Center, the scale of fresh food e-commerce soared from 4 billion yuan (580.4 million U.S. dollars) in 2012 to 95 billion yuan (13.8 billion U.S. dollars) in 2016, and 139.1 billion yuan (20.2 billion U.S. dollars) in 2017, marking a 59.7 percent year-on-year growth.

But for Internet companies trying to penetrate the sector and traditional retailers in the process of digitalization, the difficulties they have to deal with include low standardization, high level of loss and the building of supply chain. 

The adjustment follows Alibaba's organizational restructuring in November, when CEO Zhang Yong pledged to continue organizational design to better serve businesses in the era of digital economy. 

According to an industry insider, Alibaba has acquired considerable external assets via investment, buying shares and acquisition in recent years, and some of these assets overlap within the Group and need to be integrated. Taking Ele.me as an example, acquired in April, it has integrated with Aliaba's own Koubei as both are food ordering platforms.

Though Yiguo and Hema have differentiated customers and consumption scenarios, they overlap in supply chain, said the insider.

Regarding the prospect of Tmall Supermarket run by Hema, business analyst in the new retailing sector Yun Yangzi told NBD that it depends on the cooperation between Yiguo and Hema, in which the former focuses on To-B services, the latter on to-customer services.

Email: limenglin@nbd.com.cn