Alibaba, China’s largest eCommerce company, and Ant Financial, its financial services arm, are gearing up to invest $1 billion or more in Ele.me, the Chinese food delivery service.
According to a report, Bloomberg said with the funding, Ele.me will be valued at between $5.5 billion and $6 billion. The funding is going to help it compete against a service that is backed by Alibaba-competitor Tencent Holdings, also of China, called Meituan Dianping. The market for services provided via a mobile phone, whether to place food delivery orders or book beauty treatments, for example, is booming in China. Bloomberg noted sales of this type of services are forecasted to hit $1.1 trillion in 2017.
The food delivery market in China is attractive to both Alibaba and Tencent because it is one of the retail segments seeing growth. Alibaba is currently the largest shareholder in Ele.me, and Tencent, which holds a minor stake, is looking to ramp up investment, according to Bloomberg. Alibaba also has its Koubei service, which enables users to book spa treatments and restaurants reservations from their mobile phones.
Alibaba has been in expansion mode as its core eCommerce market in China continues to get saturated. It recently made plans to open up credit services to the Brazil community. On its website, people in the South American country will be able to finance purchases. It’s also been growing its Alipay, mobile payment service and Ali Cloud web hosting service. Back when Alibaba first made the investment in Ele.me, it said it would fit into its mold of funding in the online-to-offline market. This has also included cab-hailing companies that help connect consumers to services online or via app.