Alibaba’s 2018Q3 report revealed that it combined on-demand delivery Ele.me and local service guide platform Koubei. Alibaba, SoftBank, and other third parties financed the business with over USD 3 Billion.
Alibaba Group buildings in Hangzhou. Photo: Credit to Alibaba Group
Alibaba’s 2018Q3 report revealed that it combined on-demand delivery Ele.me (饿了么) and local service guide platform Koubei (口碑). Alibaba, SoftBank, and other third parties financed the business with over USD 3 Billion. In 2018Q4, local consumer service (referring to the combination of Ele.me and Koubei) contributed USD 750 million, which is 5% of the total Q4 revenue.
As stated in Alibaba’s Q4 report, the YOY (year-on-year) growth of 41% is mainly driven by China commerce retail, the Alibaba Cloud and the consolidation of Ele.me. Ele.me as a major component of local consumer service was acquired by Alibaba in April 2018 at USD 9.5 billion. In China, on-demand delivery has boomed since 2010, and after years of intense competition, the only giants left in the market are Meituan take-out delivery (美团外卖) and Ele.me. According to China Securities’ report (中信建投), Ele.me’s market share in 2017 exceeded 50.6%, while Meituan took 41.8%. Nevertheless, the situation turned inversely since 2018Q1. Meituan’s market share surpassed 59.1% while Ele.me dropped to 36%.
Combining Ele.me and Koubei is a strategy for Alibaba to strengthen its local consumer service, especially when competing with a strong player, Meituan, in the market, who is backed by Tencent. Besides the on-delivery service mentioned above, Meituan is the biggest local service guide platform. In another word, the combination of Ele.me and Koubei is the just competitor for Meituan. Merged in Alibaba’s ecosystem, Ele.me and Koubei are a critical ring in Alibaba’s business map. Ele.me and Koubei carry the mission to bring more users to Alibaba’s business ecosystem from providing on-demand delivery and local guide service. Ele.me introduces its customer flows to Alibaba system through the third party payment Alipay (支付宝) and re-enhance the user stickiness. Koubei functions similar to Ele.me through providing local guide service such as must-eat restaurants, must-go sights, and must-do events, which encourages stores to cooperate with Koubei to gain more customer flows; Koubei provides a UGC (user-generated content) community for users and tourists to share reviews according to their experience.
However, Meituan also has Ele.me-alike and Koubei-alike products. The difference between Meituan and Alibaba’s new combination is as their names suggested – the difference between two different commerce bodies - though it seems that Meituan is competing to Ele.me and Koubei, it is competing with a ring of Alibaba’s ecosystem. Meituan is backed by Tencent, but it is still an independent company listed in Hongkong Stock Exchange; Ele.me and Koubei are owned by Alibaba and heavily relied on Alibaba and Ant Finance, or we could say supported by Alibaba family. By far, Meituan is the top 1 in the local consumer service market. Who will be the top 1 is yet to be determined since all names mentioned above were used to be top 1 in the past. The game is getting much more intense and attractive for all participants.