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Pushing into each other’s domain business, Chinese Uber and Groupon are on war

Mar 14, 2018 by The Passage Team
Pushing into each other’s domain business, Chinese Uber and Groupon are on war

If you are aged between 18 and 55, with health certification, no tattoo, can ride a motorbike and be online 48 hours per week, you are guaranteed a monthly salary of 10,000 yuan (USD1,576).

China’s largest ride-hailing company, Didi Chuxing, is recruiting “loyal deliverymen” for its upcoming food delivery service, as above. For “free deliverymen”, who will have no minimum time requirement or basic salary guaranteed, will take orders freely and earn double compensations.

According to local media, Didi’s delivery service, named as “Didi Waimai”, will firstly be launched in nine cities crossing China, including Wuxi, Nanjing, Changsha, Fuzhou, Jinan, Ningbo, Wenzhou, Chengdu and Xiamen, in late March.

As many as two smartphone applications are prepared for the new service— one for deliverymen and the other for store owners. Early registered users on the platform will be better rewarded by the ride-hailing leader.

This move has been viewed as the Didi’s respond to Meituan-Dianping, the largest group buying startup in China, who recently pushed to ride-hailing.

Meituan, once known as “the Groupon of China”, launched its timeshare car rental service in Chengdu last December. Meanwhile, Didi was reported as secretly testing its own online food delivery service as a counter-blow to Meituan’s invasion into the ride-hailing sector.

It seems that the war of “food delivery + ride hailing” just got started in China.

Uber is a good example of car-hailing company benefiting from its delivering services, such as Uber Eats and Uber Rush. The food delivery service under Uber developed quickly in the second quarter of this year, taking nearly 10% of Uber’s total trade volume worldwide.

Moreover, Grab, Didi’s counterpart in Southeast Asia, has successfully launched GrabFood, a service that taps into Grab’s couriers’ fleet for food delivery. The ride-hailing to food delivery model has been proven workable.

In fact, as early as November 2015, Didi has already invested in Ele.me, then-largest food delivery startup in China. And Didi’s launch for its specific delivery service turns the war even more heated.

Investors in China’s “sharing economy” business believe that the fight between the two unicorn companies is not for each other’s business only, but also competing for visiting flows.

Food delivery and ride-hailing are two active sectors in China’s sharing economy. About 28.5% of Chinese Internet users used online delivery services in 2017, and nearly 80% of online delivery service users ordered meals using third-party delivery platforms.

Meituan, as the most popular food delivery platform in China, owns 250million registered customers and more than 500,000 deliverymen crossing 1300 cities nationwide, and completed more than 1,800 orders every day.

On the other hand, the market of car-hailing in China is also developing quickly, and Didi contributed 90% of it. In 2017, about 450 million users were served by the platform and people travelled over 7.43billion times with Didi.

Experts believe, with the development of technologies, such as Internet, IoT, could computing, there will be up to 10,000 car rental companies with more than 1 million vehicles in China. The whole market of sharing cars will worth more than 36 billion yuan by 2020.

Therefore, the companies, who can dominate those two markets, will control huge amount of users’ flowers, which are the major contributors in China’s fast developing sharing economy.

Browsing the market history of Internet, there is almost no precedent for oligarchs in specific area being beaten by new players. Market shares decided companies profit capacity. If Didi cannot take significant shares in the food delivery market in a period of time, those registered store owners and deliverymen would lose their interests on the platform. It works same to Meituan.

Many Internet-based unicorn companies like Didi and Meituan wanted to become an all-in-one ecosystem to leverage their future valuation, by expanding their business growth space. But those new services may end up as one function but not essential.

Zhao Yanrong is a former correspondent with China Daily, mainstream English newspaper headquartered in Beijing. She used to serve in its Bangkok office as Chief Correspondent for two years, and covered Chinese investments encompassing ASEAN and Southern Asia nations. She holds double masters' degrees from top Australian universities.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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