Alibaba Group Holding Ltd is committing another 1bil yuan (RM591.57mil or US$140mil) of incentives to drive more traffic to one of its most popular online services, cranking up the heat on JD.com Inc and Meituan in their ongoing battle for Chinese consumers.
Alibaba is enhancing Amap – the country’s most-used Google-like navigation service – with new features like AI-powered rankings for local businesses from restaurants to hotels and tourist attractions. It’s setting aside fresh incentives to help subsidise consumers’ spending on things like car rides and dining, the company said in a statement.
Alibaba’s shares rose about 1% Wednesday in Hong Kong, buoyed by speculation in the markets about big business updates ahead of its 26th anniversary. The company decided to unveil its enhanced Amap the same day it’s hosting a celebration at its main campus in Hangzhou, attaching unusual significance to the app.
The new ranking feature takes direct aim at Meituan Dianping’s core business – where users browse food reviews and travel guides before making purchases. Some Dianping users have complained over the years that the platform’s restaurant ratings are losing credibility.
The Amap announcement sparked a swift response from Meituan: it fired back with an online post to say it will upgrade its own ratings system using inhouse AI, and roll out a fresh batch of discounts on meal takeout. It’s also testing an agentic tool for Meituan app users, set to launch within a week. The company’s shares gained more than 2%, while JD’s stock climbed more than 5%.
Still, Alibaba’s move and Meituan swift response coincide with investors’ lingering concerns about a three-way battle for Chinese consumers that began when Richard Liu’s JD.com began spending heavily to go head-to-head with Wang Xing’s Meituan in meal delivery.
The three companies are now taking their battle into adjacent areas including quick commerce and location-based services. That’s dealt more damage to margins than anticipated: JD’s profit halved in the June quarter, while Meituan warned of major losses, triggering a US$27bil (RM113.76bil) selloff of the three companies’ shares in August.
The fierce competition has drawn warnings from Beijing. China‘s market regulator on Tuesday said it met with major food delivery platforms and urged them to “eliminate unfair competition and avoid malicious subsidies.”
Alibaba had previously pledged to invest 50bil yuan (RM29.57bil) overall on subsidies. The company’s e-commerce chief, Jiang Fan, defended that approach in an earnings call last month, saying it had already driven users to its online marketplace Taobao.
Amap, one of China‘s top mapping apps, was acquired by Alibaba in 2014 and competes with similar services from Baidu Inc. and Tencent Holdings Ltd. The Alibaba offering already provides location-based lifestyle features like ride-hailing and hotel booking, as well as rankings for destinations.
While food delivery operates on thin margins, the business of offering restaurant coupons and hotel discounts is far more profitable – so much so that other Chinese tech giants, including ByteDance Ltd, have tried to break into the space.
Alibaba itself has had its share of setbacks in this so-called local life service arena, estimated to generate US$1.5 trillion (RM6.32 trillion) in online sales this year, according to research by Northeast Securities. Its group-buying service Koubei.com, despite a merger with Yahoo’s Chinese portal, couldn’t keep up with Meituan’s rival platform, Dianping, in the early years of the mobile internet.
The newly introduced ranking service, dubbed Amap Street Stars, covers more than 300 cities and features recommendations for 1.6 million local businesses, according to the statement. The new initiative can bring 10 million daily customers to local businesses. Alibaba chief executive officer Eddie Wu said last month during the earnings call that Amap is positioned to become “gateway for future lifestyle services.” – Bloomberg
