Alibaba, Ant Invest $1 Billion in China Local Services Venture

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Alibaba Group Holding Ltd. and its finance affiliate each agreed to invest 3 billion yuan ($483 million) in a new venture targeting neighborhood services in China.

The Koubei venture with Zhejiang Ant Small & Micro Financial Services Group Co. will initially focus on the food and beverage sector, according to a statement. Both companies will provide capital and resources to drive the business.

The investment may breathe new life into Koubei, which previously operated through Taobao, Alibaba’s retail marketplace. It marks the Chinese companies’ latest attempt to expand in local services, where customers pay for laundry pickups and make restaurant bookings and hospital appointments in their neighborhood through smart devices.

“Location-based services is a really big market,” said Li Yujie, an analyst at RHB Research Institute Sdn in Hong Kong. “Establishing it as an independent business shows that Alibaba is putting a lot of emphasis on it.”

The venture’s structure may make it easier for Koubei to seek partnerships and acquisitions, Li said.

Alibaba executives have stressed the importance of establishing a foothold beyond e-commerce in what they call an “online to offline” market, which refers to the increasing use of mobile devices to buy physical goods and services.

Ant Financial’s Alipay, which processes some 80 percent of Chinese online payments, will form the payment method for Koubei’s services.

Taodiandian, the service focusing on food ordering and deliveries, and Ant Financial’s offline merchant resources will become part of Koubei’s operations, according to the statement.

The two companies didn’t specify future products from Koubei beyond the initial focus on food and beverages.