This article is the 834th original work of Deep Dive Atom

Persist in the ecosystem approach

Maintain its unique tone

Meng Fanliao | Author

Deep Dive Atom Studio | Editor

On the evening of August 15, 2024, Alibaba Group Holding Limited announced its financial results for the first quarter of fiscal year 2025 (i.e., the second quarter of calendar year 2024). The financial report showed that Alibaba Group achieved revenue of RMB 243.236 billion in this quarter, a year-on-year increase of 4%, demonstrating a strong growth momentum across the group's businesses.

This quarter, the Local Services Group (LSG) witnessed a 12% year-on-year increase in revenue to RMB 16.229 billion, primarily driven by significant growth in orders on Ele.me and Amap. Meanwhile, fueled by improved unit economics and expanded transaction scale on Ele.me, the home delivery business continued to narrow its losses, with the LSG's quarterly adjusted EBITA (Earnings Before Interest, Taxes, Depreciation, and Amortization) loss narrowing from RMB 1.982 billion in the same period last year to RMB 386 million.

This notable increase in revenue and decrease in losses serve as tangible evidence of Alibaba's improved operational efficiency in its local services segment. Behind this positive financial performance lies a series of organizational and business adjustments. This quarter's financial report brought many new highlights for Ele.me, marking the first quarter under its new management team and the first financial data released since the official launch of its "new three-year plan."

Facing increasingly fierce competition in the local services sector, Ele.me has achieved varying degrees of improvement in net GMV, order volume, and gross margin for several consecutive quarters. While maintaining steady growth, Ele.me has successfully reduced losses as scheduled, accelerating its momentum in this new operational cycle.

'New Three-Year Plan' Officially Underway

In March 2024, Alibaba Group CEO Wu Yongming announced in an internal letter that Yu Yongfu, Chairman of the Local Services Group and CEO of Ele.me, would step down from his management positions in the Local Services Group. Wu Zeming, CTO of the Local Services Group, was appointed as the new Chairman of Ele.me, while Han Liu, head of Fengniao Delivery, took over as CEO.

The new management team made it clear from the outset that they would adhere to the long-term strategic direction of an "open" and "ecological" platform. This commitment was evident in the latest quarterly business progress: In addition to continuing to launch annual support initiatives and operational tools to help merchants enhance their digital capabilities and increase revenue and profits, Ele.me also deepened its partnerships with city-level operational partners nationwide.

Public reports indicate that Ele.me launched the "Pengpai Plan" and released the TRUST operational model specifically for partner merchants, integrating technology and operational capabilities. Through two innovative services - "Offline Smart Site Selection" and "toB Business Scenario Exploration" - Ele.me better assists restaurant brands in understanding their customers and enhancing their digital capabilities.

Meanwhile, Ele.me has established deep partnerships with hundreds of city-level operational partners nationwide, providing instant e-commerce services including food delivery and retail in over 2,000 districts and counties, serving a total of 1.3 million merchants and managing over 200,000 delivery riders.

In the first quarter of fiscal year 2025, Ele.me officially embarked on its "new three-year plan." With this solid first financial report, Ele.me has opened a new chapter in its three-year battle.

Anchoring on Certainty in the New Wave

As the saying goes, "Plan before you act." On the path of healthy growth, how can Ele.me expand into larger markets and development spaces? Instant retail may emerge as a new driver for Ele.me's development in this new phase.

According to data from the Forward Industry Research Institute, the market size of China's Internet local services industry reached RMB 2.6 trillion in 2021, with a year-on-year growth rate of 15.1%. By 2025, this market size is expected to reach RMB 4 trillion. This substantial and still-growing market space offers significant potential for Ele.me in the local services sector.

Driven by the new management team, Ele.me quickly launched its "new three-year plan" focused on its business strategy, organizational development, and market positioning.

Foremost, Ele.me publicly articulated its long-term "1+2" strategy for the first time: The "1" represents building a healthy-growing home dining service platform that better understands consumers. The "2" represents two new growth curves for Ele.me: developing instant retail tailored to its strengths and expanding its instant logistics service network to expand market value.

Furthermore, the booming instant retail sector has significantly benefited Ele.me. As one of the two long-standing players in the home delivery business in China, Ele.me has built a moat in terms of its rider team, merchant resources, system technology, and more, which newcomers cannot easily surpass in a short period. Data shows that in the first quarter of fiscal year 2025, Ele.me witnessed rapid growth in non-food orders and continuous improvement in unit economics.

Considering market trends, Ele.me has consistently innovated across various instant retail scenarios. In May this year, Ele.me piloted the "Flower Gifting" channel, addressing traditional pain points in gift-giving scenarios by adding customized gift-giving functions within the channel. The concept of "delivering emotions through food delivery" is gaining popularity among the general public.

Envisioning the Possibilities of a New Future

Ele.me's new three-year plan has officially commenced, and the first financial report under the new leadership team has been well-received by the market. Both the overall contribution to local services revenue and the number of partner merchants and riders have increased significantly. In this asset-heavy, high-barrier, and long-term business operation, Ele.me's unique approach is gradually emerging.

For instance, during the recent European Championships and Olympic Games, Ele.me launched a series of fun activities such as "Guess the Score, Win Free Meals," "Play Football, Win Big Prizes," and more, providing consumers with new experiences during sports viewing.

Whether sports fans or not, all users can immerse themselves in the festive atmosphere and win various benefits and privileges on Ele.me. These innovative activities not only delighted consumers but also boosted business performance to new heights. According to Ele.me platform data, by the end of the Olympic Games, over 70 free meal events were offered, attracting over 250 million participants in the platform's "Happy Sports Festival" interactions. With the recent Autumn Equinox and Chinese Valentine's Day festivities, Ele.me's food delivery and retail orders and transaction volumes reached record highs this summer.

Additionally, addressing the heightened demand for iced beverages during summer sports viewing, Ele.me introduced the "Ice Treats with Love" promotion. During the European Championships, customers could purchase instant ice cups for just RMB 0.01 when ordering from over 50,000 supermarkets, convenience stores, and liquor stores on Ele.me. This initiative drove a 350% year-on-year increase in ice cup orders on Ele.me and boosted sales of related categories such as beverages.

Furthermore, Ele.me continues to innovate in digitally serving society. The app is deeply integrated with accessibility features, facilitating use by visually impaired users and hearing-impaired riders. For the elderly population's dining needs, Ele.me has established digital systems such as government-enterprise cooperation, digital infrastructure, and the Blue Knight "Community Hero" system. These investments represent Ele.me's unique business direction.

Looking ahead to the next three years of development, the current total consumer spending on food delivery and instant retail services amounts to less than RMB 1 trillion, or approximately RMB 1,600 per capita. However, the average annual expenditure on food and daily necessities by urban Chinese residents is RMB 10,700, suggesting a massive market potential of trillions of RMB for instant services.

By expanding beyond traditional food delivery and adhering to an ecological approach with its unique tone, Ele.me, guided by a clear strategy, may evolve into an even more exceptional entity over the next three years.