Daily Management Review

Alibaba to combine food delivery services in one


Alibaba Group is going to combine its units related to food delivery in order to consolidate resources to strengthen competition with Meituan Dianping for dominating the fast-growing service market in China, Reuters reports citing sources.

hinglish Notes via flickr
hinglish Notes via flickr
Chinese Meituan Dianping is ranked 4th in the list of the world's most highly valued start-ups after attracting $ 4 billion in valuation of $ 30 billion. Meituan Dianping is based in Beijing, but few outside of China know about the company. Meituan Dianping is engaged in the delivery of ready meals and custom services (for example, car washing in a parking lot), sells products and movie tickets and offers discounts on joint purchases. The startup attracted $ 4 billion from Chinese Tencent Holding, venture capital fund Sequoia Capital, American travel company Priceline Group and other investors.

Like Alibaba, Tencent heavily invests in retail stores and service providers. The company owns JD.com, Alibaba's most powerful rival in Internet trading, and Meituan Dianping. At the same time, Tencent positions its interest in retail not as an attack on Alibaba, but rather as a logical extension of business.

O2O, Online to Offline, is technology that allows combining digital online world and real offline world. The strategy allows non-network business representatives to become closer to consumers who spend most of their time online. The tough competition between Chinese giants and their costs for O2O projects have spurred flourishing of mobile technology in China. According to the Chinese research firm Analysys, the number of transactions of the O2O segment in China jumped by 72% last year to $ 146 billion.

Alibaba's integrated unit will include the food delivery company Ele.me and the O2O service Koubei, sources said. Alibaba hopes that the combined company will attract $ 3-5 billion, one source said. Another informant believes that the company can be valued at $ 25 billion.

"Meituan and Alibaba are two major firms which are able to offer various O2O services," told Mo Jia, an analyst from Shanghai, a technology consultant at Canalys. "Three Alibaba services complement one another and there is some logic in integrating them into one to become a competitor to Meituan."

The fundraising campaign should begin at the end of this year. According to the insider, the new division will also include Hema Fresh, a network of cash-free supermarkets that sell fresh products and delivery of goods.

According to the June report of iiMedia Research, a research firm from China, Baidu Waimai and Ele.me (acquired by Ele.me one year ago) occupied 55% of the Chinese market of food delivery in the Q1, as opposed to 41% for Meituan.

Recently, Didi chuxing started the competition by launching an online service of food delivery. However, the mobile application Didi, through which users could call a taxi, a ride or even buses in some cities, still remains the company's key business. Therefore, the main competitor of Alibaba sees it Meituan Dianping.

The company was founded in 2015 by merging the services of Meituan and Dianping; then the combined structure was estimated at $ 15 billion. According to its own data, the service cooperates with 5 million sellers of goods and services, its audience is 280 million users per year. In the last round, Meituan Dianping's estimate reached $ 30 billion.

source: reuters.com