Alibaba to Reportedly Merge Ele.me, Fliggy Into Core E-Commerce Group

By Tracy Qu

Alibaba Group is folding its food-delivery and online-travel services into its core e-commerce unit, streamlining operations in the face of ever fiercer competition.

"This marks a strategic upgrade as we evolve from an e-commerce platform into broader consumer-focused platform," Alibaba Chief Executive Eddie Wu Yongming said in an internal letter seen by Dow Jones Newswires.

Alibaba confirmed the content of the letter, which announced that food-delivery business Ele.me and travel agency Fliggy will be integrated into the company's China e-commerce division.

The shakeup comes as competition in China's on-demand delivery and online travel sectors intensifies.

Alibaba's reorganization underscores the growing strategic importance of on-demand delivery — characterized by delivery times of under an hour — for China's retail players.

The tech giant in April added a new rapid-delivery feature to its shopping platform, while rivals JD.com and Meituan have both stepped up efforts to win over consumers with ultra-fast deliveries.

According to a WeChat post from Alibaba's shopping platform Taobao, Taobao Instant Commerce and Ele.me's daily order volume surpassed 60 million within two months of the quick commerce feature's launch.

Meituan, the dominant player in on-demand delivery industry, said on its official WeChat account Monday that it is expanding its "instant commerce" feature to products including electric devices and fresh food.

While data from research firm Syntun shows that gross merchandise value sales from quick commerce rose 19% on year during the "618" promotion period, there could be downsides from the rising competition, research by Nomura suggests.

"We believe it is clear that the intensity of the competition raised by JD has way exceeded the market's initial expectation," Nomura analysts wrote in a note.

The market may have to cut earnings views for JD.com in the weeks to come, say the analysts, who are likewise concerned that Alibaba and Meituan may have spent more on food delivery and quick commerce than the market expected.

The online travel industry is also drawing fresh competition, with JD.com announcing earlier this month that it would offer up to three years of zero commission to hotels joining its JD Hotel membership program.

Ele.me and Fliggy will maintain independent corporate structures, while aligning their business goals and execution closely with the e-commerce unit's strategy, Wu said in the letter.

Ele.me, which was acquired by Alibaba in 2018, was previously under the group's local services unit.

Write to Tracy Qu at tracy.qu@wsj.com

Alibaba plans to open a second data center in South Korea by the end of this month to bolster its artificial intelligence and cloud computing capabilities, Bloomberg reported, citing the company.

The new data center is part of a previously announced 380 billion yuan ($52.9 billion) investment in AI and cloud infrastructure, aimed at meeting increasing demand from South Korean businesses for cloud and AI services, the report said.

Alibaba didn't immediately respond to a request for comment by MT Newswires.