Baidu meals on wheels ‘to go off menu’

Ma­jor food de­liv­ery com­peti­tors have been los­ing big money in fight for mar­ket share

China Daily (USA) - - BUSINESS - By MENGJING mengjing@chi­nadaily.com.cn

Chi­nese con­sumer­swho­live on cheap meals de­liv­ered to their doorsteps may see their happy days num­bered be­cause the steep dis­counts now of­fered by busi­ness op­er­a­tors may end soon as a re­sult of mar­ket con­sol­i­da­tion.

Me­dia re­ports since Mon­day have said that China’s on­line search gi­ant Baidu Inc is close to com­plet­ing a deal to sell its food de­liv­ery busi­ness, Waimai, and its group-buy­ing e-com­merce busi­ness, Nuomi, to ri­val Meituan-Dian­ping, an on­line-to-off­line (O2O) ser­vice provider backed by Ten­cent Hold­ings Ltd.

Nas­daq-listed Baidu de­nied the re­ports on its of­fi­cial mi­cro blog on Tues­day. How­ever, in­dus­try ob­servers said Baidu is likely to sell Waimai and Nuomi since it now has to keep pump­ing money into the O2O busi­nesses. This is es­pe­cially true since its tra­di­tional on­line ad­ver­tis­ing busi­ness is slow­ing.

Lu Zhen­wang, chief ex­ec­u­tive of­fi­cer of Shang­hai-based Wan­qing Con­sul­tancy, said that it is very likely that Baidu would sel­l­Waimai and Nuomi — the only ques­tion is to whom.

“It is no longer a wise de­ci­sion for Baidu to keep in­vest­ing heav­ily in Waimai and Nuomi to fight for mar­ket share against cash burn­ing com­pe­ti­tion. Its on­line ad­ver­tis­ing busi­ness has seen signs of slow down due to reg­u­la­tory re­straints,” he said.

An­other sign is the change of at­ti­tude of Robin Li, chief ex­ec­u­tive of­fi­cer of Baidu, over the com­pany’s O2O busi­ness. Li said last year he would in­vest 20 bil­lion yuan ($3 bil­lion) in Nuomi, betting big on the O2O busi­ness. But this year, ar­ti­fi­cial in­tel­li­gence has climbed to the top of his agenda in most of his pub­lic speeches.

In a re­cent in­ter­view in Cai­jing mag­a­zine, he said Baidu Waimai needs in­no­va­tion. “If it can­not beat other com­peti­tors, then drop it. A de­ci­sion must be made,” he said in the in­ter­view.

Like much of the com­pe­ti­tion in China’s in­ter­net in­dus­try, the war for the coun­try’s on­line food de­liv­ery is backed by Baidu, Ten­cent and Alibaba Group Hold­ing Ltd. The deep­pock­eted Chi­nese web tri­umvi­rate has of­fered many great deals, in­clud­ing cash re­bates and coupons, to lure cus­tomers, and it is prob­a­bly too good to last.

Huang Yuanpu, founder of iyiou.com, a site ded­i­cated to cov­er­ing and an­a­lyz­ing the moves of theO2O­mar­ket, said that most of the com­pa­nies in the O2O sec­tor lack a ma­ture busi­ness model to bring in profit and no in­vestors can keep pump­ing in money.

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