Ele.me’s announcement comes three months after Alibaba acquired full control of the food delivery app, for an undisclosed price, valuing the business at US$9.5 billion.
“The determination of Alibaba gives Ele.me confidence,” Alibaba vice-president Wang Lei, who is also Ele.me’s CEO, said in the statement. “Ele.me is not only going to win this summer’s battle [in food delivery], it will also take the crown in the local services and new retail sector. We have sufficient capital and traffic,” he added.
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Alibaba is not the only player eyeing the food delivery business. Meituan-Dianping, China’s on-demand service giant that filed for a Hong-Kong IPO two weeks ago, controls 59.1 per cent of the market, according to the China-based market research firm iResearch.
Didi Chuxing, China’s ride hailing giant, is the latest entrant in the already competitive food delivery business with a stand-alone platform called “Didi Foodie” launched in April. Didi Foodie currently operates in four mainland Chinese cities, including Nanjing, Taizhou and Chengdu, using heavy subsidies to reduce the cost of a customer order of rice to as low as two yuan (US$0.3), including delivery.
Ele.me’s pledge to invest billions of yuan also demonstrates Alibaba’s ambition to amass more bricks-and-mortar assets and further develop its short-distance logistics system. Fengniao, Ele.me’s logistics system, has established around 3,000 distribution stations across the country. Ele.me’s supply chain will also be connected with Tmall, one of the two Alibaba’s e-commerce sites, according to the company statement.
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The cash injection would provide every delivery employee with a monthly salary increase of about 1,000 yuan (US$149), the company said. The average monthly salary for food delivery workers in China’s first-tier cities was 6,829 yuan in 2016, according to a report by 58.com, a local job listing website.