The trend in O2O (online to offline) platforms engaged in the online delivery of takeout food order is sweeping China, bringing in huge investments despite encountering financing problems.
According to China Business News, many of the takeout platforms offering low-cost delivery services are losing 7-8 yuan ($1.10-$1.25) per order due to stiff competition, which is expected to continue into the first half of next year when the market will stabilize.
The report said that several investors have joined the fray. Alibaba's Xinkoubei has injected 300 million yuan ($47 million) into takeout platform Shbi.com, while Ele.com, another takeout platform, has reportedly obtained $400 million from prospective investors.
According to the report, most takeout platforms are searching for fresh funds to finance the establishment of logistics networks and to subsidize more orders.
Shbi.com, a major player in the business, was founded in Sept. 2010 by a group of investors from Tsinghua University, the Chinese Academy of Social Sciences and the Beijing University of Posts and Telecommunications. It has an estimated 2,000 workers and offers delivery services in 11 cities daily. It had received two previous rounds of funding before Ant Financial offered the latest injection.
Xu Weihao, the founder of Shbi.com, said that the platform serves online food orders as well as produce and flowers.
According to SooToo.com, Waimai.meituan.com leads the market, with 37.9 percent share in the first half, followed by Ele.com with 29.4 percent, Waimai.baidu.com with 10.2 percent, and Waimai.taobao.com with 7.4 percent.
The report added that major takeout platforms are spending large amounts of money to sustain their operations. An insider said that the amount spent to finance the huge outlay could reach 200 million yuan ($31 million) a month.
After receiving $700 million in January, Waimai.meituan.com is now raising a fresh $1-billion fund.