In the final days of July, the grocery chain was exceptionally busy. Reports surfaced of three store closures, alongside the sale of a core bakery production facility. These actions seem puzzling for a company that just recorded a 107 billion yuan turnover and claimed the second spot among Chinese supermarkets for the first time. However, these moves must be viewed within the broader strategic context of its parent company, Alibaba. In the critical battle of instant retail, this grocery chain is being redefined from an independent retail brand into a single piece of a larger supply chain puzzle. Having achieved a market scale of over 100 billion yuan, it has quietly stepped back into a supporting role.

Asset Stripping After Reaching the 100 Billion Mark

In the first week of August, the chain closed three stores in Beijing. The Jingkai (Yizhuang) location ceased operations on August 3rd, Jinyuan Store closed on August 4th, and the Lize store was also listed for closure. These were some of the chain's earliest locations in Beijing, having opened in 2018. Regarding the rumored closure of the Yuemao store in Haidian District, a shopping center employee stated it was unclear, but the current information suggested the store would not close, though its floor space would be reduced. Concurrently, the chain was selling its own factory. On July 31st, Hirisun Technology announced it would acquire 55% equity of the bakery factory, Tanghe Food (Kunshan), for 130 million yuan. This factory was not an ordinary facility. Built in April 2023 in Kunshan, Jiangsu, it was positioned as a full-chain production site, "from a single grain of wheat to a loaf of bread." As the core supply chain for its bakery business, this factory was frequently featured in the chain's marketing. It provided the production capacity for the famous durian mille-feuille cake price war with Sam's Club in the summer of 2023. However, while selling the controlling stake, the chain signed a long-term strategic cooperation agreement, committing to purchase no less than 210 million yuan annually from the factory from 2026 to 2030, totaling 1.05 billion yuan over five years. The agreement also stipulated that the chain would prioritize the factory for bakery orders and stabilize existing cooperative categories. For a company of the chain's scale, store closures and asset sales are unusual, especially after it had just delivered its best results in eleven years. At an internal all-hands meeting in June 2024, the chain's CEO had set a target of 100 billion yuan in annual gross merchandise value (GMV) within three years. According to the annual report for fiscal year 2026, the chain's overall GMV had already exceeded 107 billion yuan. By the end of fiscal year 2026, it operated over 490 stores, with online transactions contributing over 60% of GMV. In the "2026 China Top 100 Supermarkets" list released by the China Chain Store & Franchise Association, the company ranked second for the first time, behind only Walmart China. Achieving its 100 billion yuan target a year early and being profitable for two consecutive years would be a significant achievement for any retail enterprise. But before the "fruits of victory" were even fully savored, the chain began dismantling its own assets. Behind these actions, the chain's role within the Alibaba ecosystem is being redefined.

New Role: From 'Gateway' to 'Supplier'

In May, Alibaba executed a quiet but critical personnel adjustment. The reporting line of the chain's CEO was changed from the group's CTO to directly reporting to the head of the entire Alibaba commerce sector and CEO of the e-commerce business group. Multiple Alibaba insiders believe this is a precursor to the chain being integrated into the China e-commerce business group. Previously, the chain had operated independently within Alibaba for 11 years, with its own stores, supply chain, and app. The 2025 food delivery war first brought these scattered supply sources together under the umbrella of Taobao Flash Purchase. However, it wasn't until May of this year that all instant retail-related businesses, including the chain, Ele.me, and Tmall Supermarket, began operating under the same command system. Now, the chain's position within this new system is being redefined. On July 22nd, the chain officially gained a top-tier traffic entry on the homepage of the Taobao app in multiple regions, including Beijing and Shanghai. Previously, its entry was a secondary one under the Taobao Flash Purchase section. This traffic upgrade even saw its entry priority surpass that of Tmall Supermarket. At the same time, the chain's stores on the Taobao platform began implementing a low-price strategy, with price differences of up to 25% for the same product. This indicates that the chain is transitioning from a self-sufficient brand to a supplier of goods and fulfillment capabilities for Taobao Flash Purchase. The upgraded entry means it no longer needs to attract its own customers; Taobao's traffic is funneled directly to it. The price inversion suggests an intentional weakening of the chain's own app, with users being guided to order on Taobao. Data confirms this shift. The head of the e-commerce business group disclosed that after the chain integrated with Taobao Flash Purchase, its overall online order volume exceeded 2 million orders, a year-on-year increase of over 70%. However, this growth largely stems from traffic from Taobao Flash Purchase, not from the chain's own app. A more direct change comes from a strategic pivot. After the CEO took over, the chain cut down from over a dozen business formats to two main lines: Hema Fresh and the discount community store model. The chain operated over 490 Hema Fresh stores, while the discount model had opened over 200 new stores in 2025, expanding to 546 nationwide by June 2026. Before the change in reporting line, the chain's focus was on the discount model, aiming to penetrate lower-tier markets. However, after the adjustment, the direction changed. An Alibaba source revealed that the previous business focus was on the discount model, but now the requirement is to shift to a front-warehouse model. The hard discount store and the front-warehouse model are completely different business models. The former focuses on product selection and cost control, while the latter focuses on warehouse network density and fulfillment efficiency. The discount model, which had just expanded to 546 stores, was suddenly asked to change its track. The story of an independent listing has been shelved; the chain has abandoned a capital market narrative in exchange for a clearer strategic position within this architecture. It is no longer the "new retail experimental field" that needed to prove its independent value to the capital market. Instead, it is an asset on the supply side of Alibaba's instant retail landscape.

A Crucial Piece of the Puzzle

In Alibaba's logic, valuable assets are often not meant to be "independent." The chain's move from the track of an independent IPO to unified management under the e-commerce group is part of a larger logic: Alibaba is fighting a battle it cannot afford to lose. How much has Alibaba spent on instant retail in the past year? According to a report from HSBC, in the fiscal year from April 2025 to March 2026 alone, it lost approximately 90 billion yuan, nearly half of Alibaba's entire adjusted EBITA for fiscal year 2025. This massive investment directly dragged down the group's overall financial performance. In fiscal year 2026, Alibaba's free cash flow turned from a net inflow of 73.87 billion yuan in the previous year to a net outflow of 46.609 billion yuan. However, the spending was not in vain. In one year, Taobao Flash Purchase's market share has risen to over 45%, roughly equal to Meituan. Daily peak orders reached 120 million, and monthly active transaction users exceeded 300 million. Alibaba's Taobao physical e-commerce annual active buyers thus increased by 100 million, more than the total growth of the previous three years. Alibaba shows no signs of stopping. In January, an internal meeting for Taobao Flash Purchase clearly stated that the primary goal is market share growth, with a firm commitment to increase investment to achieve absolute market leadership. In May, Alibaba's Group Chairman and CEO jointly issued a letter to shareholders, formally positioning instant retail as a "core strategic pillar for the comprehensive upgrade of the Taobao and Tmall platforms." The head of the e-commerce group also gave a clear timeline: achieving positive unit economics on a monthly basis by fiscal year 2027, reaching an overall instant retail transaction volume of over one trillion yuan by fiscal year 2028, and achieving overall profitability for the segment by fiscal year 2029. This is the context for the chain's integration. Alibaba is not fighting an ordinary business battle, but a defensive war for its core e-commerce base. If Meituan successfully extends the consumer mindset of "30-minute delivery" from food delivery to all goods, Alibaba's most critical e-commerce position would be threatened. The chain's position within this system was clearly stated by the e-commerce group's head: that Flash Purchase has "driven the accelerated development of related businesses, including the chain and Tmall Supermarket." The chain's 490 stores, over 60% online order ratio, and a decade of accumulated fresh food supply chain form a substantial asset base for Alibaba's instant retail landscape. But a base is just a base. Taobao Convenience Stores are another network Alibaba is building, with its store opening target soaring from 1,000 to 3,000, and 2 billion yuan in rent subsidies being poured into community flash warehouses. Concurrently, the market reported that Alibaba had bid $1.5 billion to acquire Puyi Supermarket, more than double the valuation of its previous acquisition. On July 29th, Puyi Supermarket began a trial of listing on Taobao Flash Purchase. In essence, while it would be difficult for Alibaba to win the instant retail war without this grocery chain, the chain's role is not determined by itself, nor does it control its own narrative.