Alibaba snaps up ele.me for $9.5b
Domestic e-commerce company Alibaba Group Holding said on Monday that it will acquire Shanghai-based food delivery platform ele.me in a deal worth $9.5 billion.
The transaction marks the largest acquisition in terms of value by a Chinese internet company, and it shows that Alibaba is stepping up efforts to deploy its New Retail ecosystem to tackle intensifying competition in the domestic bricks-and-mortar retail market, analysts said.
The deal is a breakthrough as Alibaba further expands its New Retail strategy into the lifestyle services sector, read a press release Alibaba sent to the Global Times on Monday.
Ele.me will provide synergy with Alibaba’s other businesses and become a vital part of Alibaba’s New Retail strategy, Alibaba CEO Zhang Yong was quoted as saying in the press release.
Jack Ma Yun, Alibaba’s founder and chairman, came up with the concept of New Retail in October 2016. Pure e-commerce will become just one more traditional business and it will be replaced by the concept of New Retail – the integration of online, offline, logistics and data across a single value chain, according to Ma.
In a letter that ele.com’s founder Zhang Xuhao sent to employees, he said that ele. me will become a “super unicorn” company thanks to the acquisition. Ele.me will be supported by Alibaba in sectors such as finance and technology, Zhang said.
“Ele.me has accumulated plenty of consumers who have spending power in onlineto-offline [O2O] sectors, which could help Alibaba expand its offline business and further improve the group’s New Retail ecosystem,” Liu Dingding, a veteran internet analyst, told the Global Times on Monday.
Ele.me has more than 260 million users, 2 million registered vendors and 3 million delivery staff, according to information ele. me sent to the Global Times on Monday.
Alibaba has set New Retail as a core of its
business and is willing to pay a high price to get ele.me, Liu said, partly because rival Tencent is seeking cooperation with other companies such as Yonghui Superstores and stake JD.com in Inc. Yonghui Tencent Superstores purchased in a December 5 percent 2017, said media reports.
But Alibaba and Tencent are pursuing different, growth paths, said Lu Zhenwang an independent e-commerce analyst.
Lu told the Global Times on Monday that “Tencent often ties up with other companies by becoming a minority shareholder, while Alibaba is likely to hold controlling stakes or taking over the companies.”
Tencent can support its partners via introits ducing network flow to them from it's social media platforms, but Alibaba can’t do this because it has a lower network flow than Tencent, according to Lu.
Liu agreed, saying that varied develops ment models could still all find ways to grow in the domestic market, under current conditions. “Alibaba could give greater autonomy to its affiliates and expand businesses at its Liu more own noted. pace, partners while by opening Tencent up could its platforms,” embrace
“Ele.me has accumulated plenty of consumers who have spending power in online-to-offline [O2O] sectors, which could help Alibaba expand its offline business and further improve the group’s New Retail ecosystem.” Liu Dingding Veteran internet analyst
Big changes have taken place in China’s food delivery sector during the past half year, while consumers’ habits when it comes to ordering takeout food have stabilized, another domestic food delivery platform Meituan-Dianping said Monday. It noted that the platforms will continue to improve their users’ experience and make efforts to achieve sound competition in the industry.
Experts said that although Alibaba’s acquisition of ele.me will put pressure on Meituan-Dianping, the Chinese consumer market will welcome several players.
Ele.me took over its major rival, waimai. baidu, in a transaction valued at about $500 million in August 2017, according to media reports.
In 2017, ele.me and waimai.baidu accounted for 50.6 percent of transactions in the Chinese food delivery sector, followed by Meituan-Dianping and other platforms, which held 41.8 percent and 7.6 percent, respectively, according to data released by Beijing-based research company Analysys on March 26.
Meituan-Dianping will not feel much impact because of the acquisition as the platform has performed quite well during recent years thanks to its group-buying services. It also has a strong capacity in the O2O business, Liu said.
China’s fastevolving consumer market offers sufficient growth opportunities for several players to seek common development, he said.