China’s ride-hailing giant Didi reportedly scaled back a community group-buy grocery unit, Chengxin Youxuan, Chinese media Late Post reported on Wednesday. The unit is pivoting its business strategy from loss-making expansion to earning money.
Why it matters: Cutbacks at Chengxin Youxuan come as two community group-buy rivals, Tongcheng Life and Tencent-backed Shixianghui, abandon the market after years of costly cash-fueled expansion.
- Didi is still under a state cybersecurity review that began in early July.
Details: Chengxin Youxuan began to scale back its business in June, according to Late Post‘s report. The unit laid off about a third of its staff, began an all-staff pay cut, and relocated its head office from Chengdu to Beijing and Hangzhou.
- Chengxin Youxuan has reportedly laid off around 30% of its employees since July. Most laid-off staff were in city management, business development, operations, and logistics and located in central Hunan and Hubei province, the report said.
- Chengxin Youxuan canceled bonuses in August, meaning a 20% pay cut for all workers. The unit also reduced travel subsidies.
- Didi moved Chengxin Youxuan’s main office from Chengdu to Beijing and Hangzhou, closing the Chengdu office.
- The unit will relocate some staff back to Beijing and Hangzhou to focus on product research and development and data analytics, while sending more staff to front-line operational positions, Late Post writes, citing employees at the company.
- Didi didn’t respond to TechNode’s inquiries, made Thursday morning.
Context: In May, The Information reported that Didi planned a separate listing for the grocery unit as early as next year, hoping to bring a new revenue source to maintain growth as its core ride-hailing business slowed down.
- In March, China’s top market regulator fined five community group-buy platforms a total of RMB 6.5 million (around $1 million) for price dumping. Targets included Chengxin Youxuan and rival platforms backed by Pinduoduo, Meituan, and Alibaba.