We did mention earlier in a separate report that Alibaba had decided to split its entire business into six different units which meant that the AliExpress e-commerce business will now be a separate entity and its logistics and other departments will work separately as well. It was also mentioned by the company that all of these six units will have their own leadership boards and they will also have the option to go public after a few years. However, the concern was also that if there is a department that is not performing well then Alibaba will now have the flexibility to shut it down which it did not earlier as the main business could carry the other departments that were not doing well.
Now, Alibaba has also decided to split its Tmall and Taobao e-commerce businesses into separate entities and it looks a major restructuring is taking place at the company all of a sudden. However, it is worth noting that Alibaba decided to merge the Tmall and Taobao business just last year and now it has decided to split them once again with the reasons unknown. Local newspapers have reported that the decision to split these e-commerce businesses was made based on consumption trends and user demand scenarios.
Li Chengdong, founder of Dolphin, a Beijing-based consultancy said that “I think they made the changes because both Alibaba and JD.com’s business was not doing very well last year,”. He added, “Although you can cite macro headwinds as part of the reason, their competitors like Pinduoduo and Douyin are actually doing well. The adjustments are also [related to intensifying] competition.”
It is worth noting that soon after Alibaba announced that it is splitting its main business into six different units, the investors were happy and that showed in the stocks as well as both its Hong Kong and US stocks were up by about 10% soon after the announcement. Alibaba said that the decision to split its business into six parts was to “unlock investor potential” which basically means that they realized the company was becoming too big and wanted to dilute its valuation.
