Ele.me to boost market share by splurging $440m ahead of rival Meituan’s IPO

The Alibaba-owned online food delivery platform is not worried about funds at this stage, said its recently instated CEO Wang Lei.

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In a move to increase its market share in China to over 50 per cent, Alibaba-owned online food delivery platform Ele.me will be spending CNY 3 billion (US$440 million) from July 2018 to September 2018 on discounts and promotions, said CEO WANG Lei to Reuters on Monday.

Started in 2008, Ele.me’s main rival in China is Tencent-backed Meituan Dianping, which has filed for a Hong Kong IPO. In 2017, Ele.me bought other rival Baidu Waimai, formerly owned by Baidu.

Offering heavy subsidies is an inevitable play, given the current competitive landscape. In Wuxi, China’s dominating ride-hailing giant, Didi, which also stepped its toes into online food delivery, provided first-time users of its food delivery service with various discount coupons. In days, it managed to garner about 30 per cent of the whole Wuxi online food delivery market, Didi claimed.

Wang said that the firm expects parent company Alibaba to “invest billions of yuan” in the food delivery portal. “Funds are not our core issue right now,” he added.

After all, Meituan, which is valued at US$60 billion, incurred an approximately US$2.8 billion loss in 2017, the most in three years. Sixty-two per cent of Meituan’s revenue in 2017 comes from food delivery. Going forward in this battle of three, everyone can be expected to be on a customer acquisition spending spree.

Alibaba officially completed its buyout of Ele.me in April 2018 when the Chinese tech giant purchased the remaining shares in the smaller firm that it did not already own, valuing Ele.me at US$9.5 billion. As part of the deal, Wang, who was previously a vice president at Alibaba, replaced the outgoing CEO and Founder Zhang Xuhao, who now acts as Chairman to Ele.me and serves Alibaba as an advisor on “new retail”.

An SCMP report stated that Ele.me will move into other categories, potentially entering new markets like on-demand flower and medicine delivery.

 

Editor: Ben Jiang