Alibaba and JD.com are investing heavily in food delivery and crowdsourced delivery businesses as they continue to broaden their product and service ‘ecosystems’ in the rapidly-developing Chinese e-commerce market.
Alibaba Group and its affiliate Ant Financial will jointly invest US$1.25 billion in Ele.me, which has about one third of the fast-growing Chinese online food delivery market, while JD.com will merge its supermarket delivery business with larger player Dada to create a leading on-demand local delivery company.
Alibaba Group, fresh from spending $1 billion on a majority stake in Singapore-based e-commerce group Lazada, will put $900 million into Shanghai-based Ele.me while Alibaba affiliate Ant Financial will invest $350 million, the group’s Azila corporate news site wrote, citing an Ele.me press release.
In 2015, Chinese online food delivery companies increased combined turnover by 200% to RMB45.8 billion ($7 billion) and the sector is predicted to soar to revenues of RMB245 billion ($375 billion) in 2018. Ele.me currently has a market share of one third of this online food delivery market, according to researchers Analysys International.
Alibaba Group’s investment in Ele.me, which will remain independent, will accelerate its push into China’s fast-growing local services market, which is also known as online-to-offline (O2O). By adding Ele.me to its growing roster of O2O partners and affiliates, the e-commerce giant will be able to more quickly achieve scale in local services by leveraging Ele.me’s customer base of 50 million users in 300 Chinese cities. At the same time, the e-commerce group will use its popular mobile apps Alipay, a digital wallet, and Mobile Taobao to support Ele.me’s growth.
Last year, Alibaba and Ant Financial already invested nearly $1 billion in Koubei.com, which provides users with a mobile dynamic local restaurant directory. As part of the latest investment deal, Ele.me will take over Koubei’s online food delivery service.
“By empowering each other, this will be a win-win deal and could expand the boundaries of e-commerce,” stated Alibaba Group CEO Daniel Zhang. Ele.me founder and CEO Mark Zhang said Alibaba Group and Ant Financial offer “strengths including huge traffic, business insight and mature payment and financial services.”
Meanwhile, rival JD.com announced today (April 15) that its O2O business, JD Daojia, will merge with Dada Nexus Limited, China’s largest crowdsourcing delivery platform, to form a new company, operating under the Dada brand. JD.com will own approximately 47.4% of the enlarged company in exchange for the JD Daojia business, $200 million in cash and resource support.
JD.com said that by leveraging the combined extensive crowdsourcing network of Dada and JD Daojia, the new company will provide low-cost delivery services to China’s retailers, service providers and O2O enterprises. The O2O supermarket platform will continue using the JD Daojia brand, leverage the expanded delivery network and focus on the location-based mobile commerce sector, cooperating with offline supermarkets, convenience stores and other local businesses to provide consumers the fastest premium shopping experience.
Since launching in June 2014, Dada has quickly grown to become the leader in China’s crowdsourcing delivery market. The company’s network covers 37 key cities in China with a total of 1.3 million registered crowdsourced delivery people and average daily deliveries of over one million in peak seasons.
Launched in April 2015, JD Daojia provides consumers two-hour delivery of products from local supermarkets and other partners, and already became the leader in China’s O2O supermarket industry in its first year, covering over three million customers in 13 cities.
“This merger is a win-win cooperation and an important step forward in building a sustainable O2O ecosystem,” said Richard Liu, CEO of JD.com. “JD Daojia and Dada’s business are highly complementary, with the companies sharing a deep commitment to providing fast delivery service and excellent user experience. I am confident that the new company will continue to innovate and increase efficiencies, which will help to improve quality of life for consumers throughout China.”
“Dada is delighted to enter into this strategic cooperation, which marks a new phase of our business that will leverage our respective strengths to achieve greater efficiencies,” said Philip Kuai, CEO of Dada. “We are grateful for the tremendous support that JD.com is providing, which will help drive the integration between JD.com’s premium brand, user base and supply chain, and Dada’s strength in delivery crowdsourcing. We are excited to further enhance product innovation and deliver a better and faster O2O service experience for users.”
JD.com, which describes itself as China’s leading online direct sales company and the country’s largest Internet company by revenue, increased net revenues by 28% to RMB181.3 billion (US$28 billion) in the year ended December 31, 2015.
The group has an extensive logistics operation, with seven fulfilment centres and 213 warehouses in 50 cities, along with 5,367 delivery stations and pickup stations in 2,356 counties and districts, staffed by its own employees.
