ALIBABA MERGES MORE BUSINESS UNITS

Remember how, a few years ago, Alibaba announced it was planning to let its 6 main business units and ‘N’ other businesses go public? That never happened.

In fact, the opposite has been happening. Not long ago, Alibaba merged its domestic and international e-commerce business units. And now, it’s adding the local services business unit to the same division. And then there were four …

The logic behind the decision is that in Alibaba’s consumer ecosystem, Taobao serves as the entrance point for all services, including Taobao, Tmall, travel service Fliggy, and food delivery/instant retail brand Eleme. The two CEOs of Eleme and Fliggy remain in their roles but now report to Jiang Fan, the CEO of the e-commerce business unit.

The two will “will continue to maintain a corporate management model, but the execution of business decisions will be based on the concentrated goals and unified operations of the e-commerce business group, which is a strategic upgrade from an e-commerce platform to a large consumer platform."

There has always been internal competition, for instance, between Taobao’s instant retail service Taoxianda and Eleme. It’s likely one of the reasons Alibaba fell behind Meituan in the instant retail sector. Taoxianda had to arrange its own couriers while Eleme didn’t get traffic from Taobao.

The combination of Taobao and Eleme has already attracted a significant number of new users to Taobao. Although it has to be said that 25% of daily orders reportedly consist of heavily discounted milk tea and coffee deliveries, as I recently discussed. JD has also seen an increase in users on its app after it started food delivery. JD’s founder Richard Liu claimed: “The money lost in food delivery is more cost-effective than buying traffic from Douyin and Tencent."

It’s clear that these decisions are very much related to instant retail. Just as JD is trying to improve the density of couriers and merchants it offers by adding food delivery, Alibaba is attempting to create better synergies by integrating Eleme into its e-commerce business unit.

Nothing much is being said about Fliggy, except that it has a place among consumer-oriented services on Taobao. Without Eleme, the little flying pig would probably be lonely in the Local Services business unit.

Alibaba has a reputation for constant organisational changes. We don’t dare to predict how long things will stay like this.

Source: Latepost