Baidu, China’s largest search engine, has sold its Xiaodu food delivery subsidiary (which operates under the Waimai brand) Rajax, which operates Ele.me, China’s leading food delivery business that is valued at around $6 billion and counts Alibaba, Tencent and Sequoia among its investors. The deal is valued at $800 million $500 million estimated for the business, and $300 million in an additional traffic agreement. The deal will give Baidu a small stake in the bigger food delivery operation.
The logistics involved plus the investment needed to acquire and keep customers in competitive markets makes food delivery a very cost-intensive business that has proven challenging for many to bring into the black. The divestment is a direct result of the above. However, Ele.me continues to grow massively, and others like Uber and Amazon are also doubling down in this area, building out from their logistics operations as a base for growth. As more of our economy shifts to consumers using digital platforms to buy goods and services, there’s a clear opportunity there for those hungry to seize it.