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Alibaba’s local consumer businesses reportedly plan layoffs as they lose ground to Meituan

Written by Jiaxing Li Published on     2 mins read

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Meituan’s revenue from food delivery was more than double that of Alibaba’s Ele.me in Q3 2021.

Food delivery platform Ele.me and lifestyle search engine Koubei, two main business lines of Alibaba’s local consumer service division, may undergo downsizing by the end of January, Jiemian reported on Tuesday. This is a development under the context that Ele.me and Koubei are outmatched by Tencent-backed Meituan.

Almost every unit of Ele.me and Koubei will trim its headcount due to underwhelming performance, Jiemian reported. Ele.me said on Wednesday that the report is untrue, and indicated that the company has a plan for future development. Koubei has not offered a comment as of press time.

Alibaba merged Ele.me and Koubei to form the aptly named Alibaba Local Life Service in 2018 and set up a local consumer service division to compete with local service giant Meituan. Last July, it also folded in mapping service AutoNavi to consolidate the division and fortify this vertical of services.

Alibaba Local Life Service’s performance has long been sluggish compared to Meituan, which controlled 67.3% of China’s food delivery market in Q1 2020, while Ele.me only had 26.9% market share, according to data compiled by Qianzhan Industry Research Institute.

Alibaba sees local service as a “strategic initiative area,” CFO Maggie Wu told investors in November 2021. The company has been investing more in this space to gain more users and increase its coverage in lower-tier cities, she said.

However, Alibaba’s local consumer service lost ground to Meituan in 2021. In the latest quarterly earnings report, the company’s revenue from local services for the three months ended September 30, 2021, was RMB 9.5 billion (USD 1.5 billion), accounting for 5% of company-wide revenue. It was one of the slowest-growing business divisions, drawing cash from commissions and fees from Ele.me’s delivery services.

During the same period, Meituan reported revenue of RMB 19.7 billion (USD 3.1 billion) from its food delivery business, slightly more than double that of Alibaba’s earnings in this arena.

Yu Yongfu, the new CEO of Alibaba’s local services division after a recent sex scandal that put the company in the limelight, issued an internal letter in December 2021, saying that the sector will be the “match point” for China’s internet industry for the near future.

In the next three years, Ele.me will become a “super app,” and the company’s local services division will transfer into a platform providing product flow algorithms and real-time logistics, Yu said.

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