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Oct. 15 (NBD) – Alibaba announced last Friday the establishment of a local services company by consolidating its food delivery unit Ele.me and local food review platform Koubei.

According to Zhang Yong, Chief Executive Officer of Alibaba, the new company, aimed at combining local services with new retail to generate fresh growth drivers, marks a milestone for Alibaba's layout in the comprehensive consumption sector. Local services have become another highlight in Alibaba's eco-strategy after new retail.

In fact, the internet giant released an early sign for the merger in the financial report for the first-quarter of 2019 published on August 23. According to the report, Alibaba has built a holding company covering the business of Ele.me and Koubei, and the new company has received investment commitments of over 3 billion U.S. dollars from Softbank and Alibaba.

The newly-established entity not only targets at the catering industry but also shoulders a heavier responsibility of redefining the urban life. According to Alibaba's plan, the new company is expected to cover a full range of local services businesses including supermarkets, beauty salons, KTVs, as well as leisure and entertainment, with its services estimated to be accessed by 800 million urban and rural residents.

Both Ele.me and Koubei focus on the catering sector only with the former on home delivery and the latter on in-store consumption. 

The two units will continue to run independently but will work with each other to reinforce the synergy effects, a person in charge from Koubei told news outlet 21st Century Business Herald.

The integration of Ele.me's local services resources and instant delivery capability and Koubei's merchant service system will facilitate the digitalization and upgrading of the local services market.

It is widely acknowledged that the merger is going to intensify the competition between Alibaba and its long-term rival Meituan-Dianping.

Statistics from analysis provider Analysys reveals that up to June this year, Meituan Waimai, the food delivery platform of Meituan-Dianping, and Ele.me have had roughly 37.9 million and 62.8 million monthly active users, respectively.

According to a report on food delivery released by Data Center of China Internet (DCCI) in 2018, Meituan-Dianping, Ele.me, and Star.Ele (formerly known as Baidu Waimai) are the top three food delivery platforms. Among them, Meituan-Dianping ranks first with a market share of 63.3 percent, while Ele.me only logged 29.1 percent.

It's predictable that the competition between Alibaba and Meituan-Dianping will last for a rather long time. The success of the incoming battle may lie in the building of a sound business model and differentiated user values, reported 21st Century Business Herald.

 

Email: wenqiao@nbd.com.cn

Editor: Wen Qiao