Alibaba Takes Control of Ele.me

Alibaba announced on April 2 that it will acquire all outstanding shares in Shanghai-based Ele.me, a leading online delivery and local services platform, in a transaction that values Ele.me at US$9.5 billion. Prior to this transaction, Alibaba and its affiliate Ant Small and Micro Financial Services Group owned approximately 43% of Ele.me shares. Ele.me will continue to operate under its own brand following the acquisition. Daniel Zhang, CEO of Alibaba Group, said, “We are excited for Ele.me to become a part of the Alibaba ecosystem. Under the leadership of its founder and management team, Ele.me has achieved leading market share in China’s online food delivery and local services sector. Our shared belief that New Retail will create more value for customers and merchants has brought us together. Looking forward, Ele.me can leverage Alibaba’s infrastructure in commerce and find new synergies with Alibaba’s diverse businesses to add further momentum to the New Retail initiative.”

The Acquisition Bring New Synergies

Ele.me has developed a network of 3 million couriers to provide fast delivery of food orders in cities throughout China. Integrating this core expertise with Alibaba’s existing infrastructure should bring new synergies. Alibaba plans to combine some of Ele.me’s functionalities with its own local services platform Koubei to provide consumers with a wider range of products and services on-demand.“As one of the most frequently used applications, food delivery is the single most important entry point in the local services sector,” said Zhang. “We can already see that a vast, multi-dimensional local instant delivery network formed through a food delivery service will be an essential piece of the commerce infrastructure.”By combining the platforms, Alibaba can more efficiently utilize Ele.me’s large delivery force that is currently fulfilling orders in cities across China. In addition, Alibaba can potentially integrate Ele.me’s extensive network of couriers into Cainiao, Alibaba’s logistics network. Alibaba has been investing heavily in Cainiao to enhance its logistics capabilities, but last-mile delivery has been a challenge. Thus, integrating Ele.me’s network of couriers could further enable Alibaba’s New Retail strategy of bringing online and offline retail into one seamless experience for shoppers.

Industry Consolidation to Compete with Meituan Dianping

In August, Ele.me acquired Baidu Waimai, the food delivery unit of Chinese search engine Baidu, to compete with its major rival, Tencent-backed Meituan Dianping. According to Trustdata, a data analytics firm, the combined online food delivery market share of Ele.me and Baidu Waimai in China reached 45.9%, as of 2017. This will give Ele.me a boost in its bid to challenge Meituan Dianping. Leveraging Alibaba’s financial and operational resources, such as its delivery platform Koubei, Ele.me will be better positioned to compete with Meituan Dianping.

Source: Trustdata

Xuhao Zhang, Founder of Ele.me, said, “This acquisition shows that we have built Ele.me into one of China’s most valuable internet businesses. Our customers, merchants and partners will benefit from further integration into the Alibaba family. We share the same strategic vision that New Retail has a bright future and being part of Alibaba’s ecosystem will take Ele.me’s growth to a new level.”

Senior Executive Changes

Upon completion of the acquisition, Xuhao Zhang will become Chairman of Ele.me and special advisor to Alibaba’s CEO on New Retail strategy. Lei Wang, Vice President of Alibaba Group, will become CEO of Ele.me. Wang joined Alibaba in 2003 and has held a number of senior positions in Alibaba’s consumer e-commerce, B2B, O2O service and healthcare businesses.

Summary

Taking full control of Ele.me allows Alibaba, the leading e-commerce platform in China, to integrate Ele.me’s extensive network of couriers and services with its own infrastructure: for example, combining with Koubei’s services to provide local services to consumers more efficiently, and potentially complementing Cainiao’s network to further enable Alibaba’s New Retail strategy to bring a seamless online and offline retail experience to shoppers.