Alibaba's hunger for Ele.me brings about multibillion deal
Chinese e-commerce giant Alibaba is to acquire full ownership of food delivery firm Ele.me in a deal that values the Shanghai-based startup at US$9.5 billion.
Alibaba and its affiliate Ant Financial currently own 43 percent of the app-based Ele.me and said in a statement yesterday that it would acquire all remaining shares.
“Ele.me can leverage Alibaba’s infrastructure in commerce and find new synergies with Alibaba’s diverse businesses to add further momentum to the new retail initiative,” said Daniel Zhang, Alibaba Group’s chief executive.
Buying Ele.me is a major step for Alibaba to expand its local lifestyle services within its “e-commerce ecosystem” and to provide new shopper experience, Zhang said.
The acquisition will advance the e-commerce giant’s new retail strategy that was put forward by Chairman Jack Ma last year and aims to combine online and offline technologies to offer consumers wide-ranging products and services.
By combining Ele.me’s online home delivery services with Koubei’s data analyzing capability to optimize restaurants’ supply chain and menu offerings, Alibaba hopes to provide an integrated experience to online and offline consumers.
Ele.me will keep its own brand after the deal is finalized and will continue to work closely with its existing partners and merchants. Founder Zhang Xuhao said in Shanghai yesterday that he and other founding members will stay in the company, whose ultimate goal is to provide on-demand delivery service within 30 minutes.
Capital plays a small role in the deal and the bigger picture is the integration of online and offline resources and a strong retail ecosystem. The collaboration with Alibaba will help to fulfill that purpose, he said.
Ele.me, meaning “are you hungry” in Chinese, was set up as an online food-ordering system by three co-founders from Shanghai Jiao Tong University with 100,000 yuan (US$15,930) startup capital. It soon became a unicorn company — a startup that evolves into a firm worth over US$1 billion — receiving US$1.25 billion investment from Alibaba and Ant Financial in 2016.
Ele.me’s delivery network is expected to serve as infrastructure for merchants to leverage technology capability under Alibaba’s new retail blueprint so that they can access consumers more efficiently.
Koubei, a lifestyle service joint venture between Alibaba and Ant Financial, will also combine resources with Ele.me’s delivery network.
Alibaba’s Vice President Wang Lei will become chief executive of Ele.me while Zhang Xuhao will be chairman of Ele.me and special adviser to Alibaba with regard to the new retail strategy.
The booming of on-demand delivery service will require capital and integrated resources from both online and offline, analysts said.
By the end of this year, the food delivery market size will be worth 240 billion yuan, according to iiMedia Research, with the top players including Tencent-backed Meituan Dianping and Ele.me. Both firms have been offering big discounts in an effort to keep market share amid fierce competition.
According to the Internet consultancy firm China E-commerce Research Center, fiercer competition between food delivery platforms is likely. “Alibaba is set to confront Meituan Dianping not only in the food delivery service but also cloud computing and a wide-ranging business initiatives,” said director Cao Lei.
Internet giants with deep pockets such as Alibaba and Tencent have spent billions investing in both offline and online retail companies.
Alibaba’s alliance includes home electronics retailer Suning, Intime Retail, Sanjiang Shopping Club and Lianhua Supermarket, while Tencent has tied up with JD.com, Meituan Dianping, Wal-Mart and Yonghui Supermarkets.