Chinese e-commerce giant Alibaba will buy out the remaining shares of food delivery platform Ele.me, a transaction that will give the restaurant takeout and local services app a 9.5 billion US dollar valuation.
The deal, the largest among China's tech giants to date, will give Alibaba access to Ele.me's legion of over 3 million delivery personnel spanning the nation, enabling the e-commerce giant to promptly dispatch meals, groceries and an increasing wider array of goods as it gradually bets down on a 'new retail' strategy.
Alibaba will be buying back around 57% of Ele.me outstanding shares from earlier investors including supermarket chain Hualian Group and Jd.com, most of which backed earlier rounds to capitalize on China’s retail revolution.
That refers to the shift taking place in the consumer market in which shopping becomes a seamless blend between online and offline channels, distinguished by personalized design and experience and tech savvy and social media friendly marketing techniques, all held in place by a highly efficient and data-driven logistics or delivery system.
Ele.me, which boasts 26 million users nearly a decade after being founded out of a college dorm, says that they chose to merge into the Alibaba business sphere despite the fact that institutional investors were prepared to continue funding the cash-burning company.
“Money is not everything in this current phase of on-demand services sector,” said Ele.me founder Zhang Xuhao in a letter to staff on Monday, “the trend is a complementary relationship between new retail and food delivery, which is why we choose to partner with Alibaba, who has the strongest position in new retail.”
Alibaba has over the past two years made a number of forays to attain a head start in the nascent sector, privatizing mega sized supermarket chains and picking up smaller fresh food delivery competitors along the way, launching an array of Hema supermarkets, a hybrid between a grocery store, food court and takeout restaurant all tied into an app, under its new retail strategy.
Competitors such as Jd.com have also been quick to move in on the evolving spending habits of consumers, rolling out a similar concept--7Fresh. Alibaba's chief rival, Jd.com has its advantage of a sizeable fleet of delivery personnel to bolster any new retail ambitions, both through its homegrown logistics system, and through Dada, a crowd sourcing delivery company that has formed a joint venture with Jd.com's online to offline business.