Alibaba to Invest Billions of RMB in Food Delivery and Local Services

Alibaba to Invest Billions of RMB in Food Delivery and Local Services

Source:iResearch August 08,20189:08 AM

Alibaba (BABA) announced that through its subsidiary Ele.me, it will invest billions of RMB in expanding its food delivery and local services between July and September. In particular, the fund would be invested on integrating Ele.me’s existing platform with BABA’s new retail ecosystem and subsidizing merchants and delivery personnel.

On a separate note, BABA’s LST, a B2B eCommerce platform, announced partnership with Ele.me in last mile delivery. Through LST, Ele.me will provide logistics services for Tmall convenience store franchisees. Ele.me currently operates 3,000 delivery stations nationwide.

iResearch’s view: We think the incremental spending through Ele.me would likely pressure BABA’s margin in September quarter. The competition in local services could get even more intense in the future, as Meituan would invest the capital raised from IPO to compete against BABA, a potential threat to BABA’s margin. The partnership between Ele.me and LST would help BABA to improve its B2B merchant services capability. We expect to see more cooperation between BABA’s retail units and Ele.me in offline services going forward.

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