Alibaba has announced that it has merged two of its food delivery services Ele.me and Koubei into the Alibaba Local Services Company.
According to CEO of Alibaba Group Daniel Zhang statement on October 12, the company represents a significant milestone for Alibaba’s attempt to reach consumers, The Paper reports. Following “new retail,” local services have become another highlight in Alibaba’s ecosystem strategy.
In August, Alibaba confirmed that it has invested $3 billion in the company along with Softbank. According to an earlier Reuters report, Alibaba is looking to raise between $3 billion and $5 billion for the entity which could be valued at up to $25 billion. Alibaba did not confirm these plans.
Alibaba acquired all shares from Ele.me in April this year in a deal that valued the food delivery platform at $9.5 billion. Alibaba has been an investor into the platform since 2016.
O2O is big business in China. Since the acquisition, China’s food delivery industry has plunged into another money-burning competition with Ele.me going after Tencent-backed Meituan Dianping. Ele.me announced in July its plans to spend more than $440 million from July to September to expand its market share to over 50%. Ele.me has also struck a deal with bike rental platform HelloBike for sharing user bases in order to strengthen themselves against competition from rivals such as Meituan-backed Mobike and ofo.
Another highly visible O2O turf war between Tencent and Alibaba is currently playing out between Starbucks and fast-rising coffee startup Luckin. After Starbucks announced cooperation with Alibaba in August followed by the launch of its Ele.me store, Luckin and Tencent signed a “smart retail strategic agreement” to explore the new retail trend.
On the other hand, Koubei, which is a joint venture between Alibaba and Ant Financial, has focused on commerce including fresh food and medicine delivery. According to the report, the two brands will continue to operate separately but they will cooperate. Ele.me’s has gradually begun cooperating with e-commerce platform Tmall, Hema Store, and Ali Health.
Ele.me’s Hummingbird delivery service (蜂鸟配送) is considered an important addition to Alibaba’s “new retail” strategy. The delivery service has since started providing distribution services for more than one thousand supermarkets in China. The ultimate goal is speeding up deliveries from Alibaba’s e-commerce platform Taobao and Tmall to same-day delivery, something that Alibaba’s main rival JD already provides through its in-house delivery system.
Koubei and Ele.me reach 3.5 million merchants in 676 cities while the goal is to expand the availability of Alibaba’s digital local services to 800 million urban Chinese citizens, according to the report.