Why China’s internet giants are colliding over local services

A 3D rendering of Alibaba’s logo on trucks / Photo credit: Максим Кузубов

Jeffrey is a TIA Star Contributor and publishes high-value content that serves the Asian tech community. Read more from TIA Star Contributors here.

“Local services” has been a hot topic this year, and we have seen many Chinese digital giants make big moves in the space.

Meituan

Tencent-backed Meituan-Dianping bought Mobike. They also did some trials in ride-sharing (another local service).

The company has always been a services company (food delivery, hotel and restaurant reservations, etc.), but they are clearly expanding into transportation and other local services. They have also opened two new retail-type supermarkets.

Didi

Ride-sharing giant Didi Chuxing has launched food delivery in several cities and has received a US$500 million investment from Booking Holdings, which can be interpreted as a move toward travel and hospitality services.

They are also opening their driver services (Xiaoju Auto Solutions) to all car owners, which may mean they’re deepening in mobility services and adding new value-added services to this.

Alibaba

Alibaba is expanding from ecommerce to local services on multiple fronts. They now offer hotel reservations (Fliggy) and bike-sharing (Hellobike) and have shown indications of going into ride-sharing via AutoNavi.

Most importantly, they are making big moves in Ele.me, Koubei, and in delivery overall.

According to Alibaba co-founder Joe Tsai, “Alibaba’s three-pronged consumer offerings in retail, entertainment, and local services will be the long-term drivers of value creation, as the Chinese middle class expands and more of these consumers demand a higher-quality lifestyle.”

Alibaba’s new retail initiatives also depend on local services, including delivery and in-store services.

Ctrip

Ctrip continues to expand internationally and is staying focused on hospitality and travel. They offer hotels, trains, and tour groups, but they are increasingly customizing travel and tours. The company has also taken steps into ride-sharing.

What’s going on?

So, why are so many of China’s digital giants moving into local services?

At the simplest level, it is because there are opportunities for synergies in adjacent businesses.