Caixin
Nov 20, 2019 07:45 PM
BUSINESS & TECH

Alibaba’s Growth-Hungry Ele.me Takeout Service to Serve Up Data to Merchants

Ele.me has been searching for other revenue streams, announcing in June that its logistics arm would begin taking grocery delivery orders to make better use of their armies of delivery workers and boost revenue. Photo: IC Photo
Ele.me has been searching for other revenue streams, announcing in June that its logistics arm would begin taking grocery delivery orders to make better use of their armies of delivery workers and boost revenue. Photo: IC Photo

Ele.me, one of China’s two dominant food delivery platforms, will offer value-added services such as customer data analysis and technical support to merchants as a new revenue stream, after years of breakneck growth have offered disappointing returns and left the market overcrowded.

Company CEO Wang Lei announced the move at a press conference on Tuesday, where he remarked that food delivery industry revenue growth has dropped to 30% this year, down from 90% in the first half of 2018.

Wang said he hoped the new strategy would help the company navigate the increasingly saturated market. A company source said the shift in strategy came as Ele.me struggled to find new customers.

Ele.me is owned by deep-pocketed e-commerce giant Alibaba Group Holding Ltd., and has been locked in a costly years-long subsidy war with Meituan Dianping, which is backed by social media behemoth Tencent Holdings Ltd. Wang, who is a vice president of Alibaba, previously said there would be “no ceiling” on the parent company’s investment in Ele.me’s development.

Speaking on Tuesday, Wang said Alibaba’s service providers — including Ele.me and food review platform Koubei — will focus on further integration with offline businesses, analyzing customer data for merchants and providing online marketing in collaboration with Alibaba’s online advertiser Alimama and its data provider Databank.

While aggressive subsidies have helped Ele.me and Meituan Dianping crowd out smaller players and grow their market share, neither company has yet posted a net profit from their delivery businesses.

Meituan Dianping reported its first-ever profit since going public in its latest reporting quarter as the delivery business improved. Meituan said the delivery business is profitable on a gross profit-basis in the report, but did not say it had posted a net profit.

Similarly, Alibaba said revenue from its local customer services, which comes primarily from Ele.me, rose 36% to 6.8 billion yuan in the three months ending September. The parent company hasn’t disclosed a net profit figure for the business sector.

Ele.me has been searching for other revenue streams, announcing in June that its logistics arm would begin taking grocery delivery orders to make better use of their armies of delivery workers and boost revenue.

In May, Meituan said its own delivery brand had secured new vendors such as Carrefour, food franchise CFB Group, fruit distributor Pagoda, online supermarket Dmall, and pharmacy app Dingdang, in a bid to move beyond takeout.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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