Alibaba’s food delivery service Ele.me is reportedly seeking a US$3 billion new funding round to finance an increasingly fierce market share battle with rival Meituan Dianping and new comer Didi Waimai, according to Chinese media reports citing insiders.
Alibaba did not immediately respond to China Money Network’s email seeking for comment. There is no information on who the potential investors may be.
The news came after Ele.me announced to spend a total of RMB3 billion (US$440 million) this summer on subsidies and marketing to expand its market share last week. CEO Wang Lei earlier said his goal was to achieve a 60% to 70% market share by 2020 for Ele.me.
In the first quarter this year, Ele.me led China’s food delivery market with a 55% market share, followed by close rival Meituan Dianping, with 40.8% market share, according to IIMedia Research. At the same time, ride hailing firm Didi Chuxing entered the space with its own food delivery operation that currently span five smaller cities in China including Wuxi and Chengdu.
An Ele.me employee told Chinese media that Ele.me lags behind in its presence in lower-tier cities and its RMB3 billion subsidy programs will be primarily targeting those areas.
User of China’s food delivery service reached 300 million in 2017, up 19.1% year-on-year, according to IIMedia Research. The user base is expected to grow to 355 million in 2018.
In April, Alibaba acquired all outstanding shares that it did not previously own in Ele.me in a deal valuing the target company at US$9.5 billion. The acquisition aims to further integrate Ele.me’s services into Alibaba’s ecosystem and help advance Alibaba’s New Retail strategy.