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Alibaba's Ele.me Turns to Drones for Faster Food Deliveries

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【Summary】Drones cover roughly 70 percent of the delivery route, due to the strategic location of the drop-off points. On the ground, workers responsible for the ‘last-mile’ part of the delivery only have to complete 15 percent of their previous routes.

Michael Cheng    Jun 10, 2018 9:30 AM PT
Alibaba's Ele.me Turns to Drones for Faster Food Deliveries
author: Michael Cheng   

Local food delivery services are in high demand worldwide. In China, Alibaba's Ele.me has turned to drones for efficient and low-cost operations. The startup is facing stiff competition in the country, as it takes on Tencent's Meituan Dianping.

Ele.me recently received approval from local officials to use quadcopters for operations within Shanghai's Jinshan Industrial Park. The food delivery drones cannot deploy orders at the exact location of customers, as it relies on specific drop-off points in the area to reduce traveling time.

Securing Drop-off Points and Food Deliveries

So far, a total of 17 routes and 34 drop-off points (2 drop-off points per route) have been established by the startup for food deliveries. According to the company, deliveries take roughly 20 minutes to complete. Consistency is greatly improved and scheduling is more predictable, as the quadcopters do not compete for space in the air.

Upon deployment at a designated drop-off point, the order is picked up by a delivery person. To finish the transaction, the individual delivers the food to the location of the customer.

Drones cover roughly 70 percent of the delivery route, due to the strategic location of the drop-off points. On the ground, workers responsible for the ‘last-mile' part of the delivery only have to complete 15 percent of their previous routes. At the end of the day, such benefits translate to lower operating costs.

"Our delivery boxes are a secured part of the drones, so the food won't come down," said Zou Li, project manager at Ele.me, during an interview with Kankanews.

"Besides, we undertake a routine examination before each flight, and regular maintenance will ensure its stability and safety."

China's Local Delivery Services Sector

From the US to China and Europe, the local delivery services industry has been proliferating rapidly in the past decade. Across the world, tech giants are capturing the nascent sector by expanding their businesses to cater to such trends. In China, Alibaba acquired Ele.me earlier this year in order to boost its delivery service network in the country.

Led by accomplished entrepreneur Jack Ma, the company owns 43 percent of the startup (along with Ant Small & Micro Financial Services Group). The possibility of a buy-out deal is on the table, which first surfaced in February. Alibaba's initial investment in the startup was worth $1.25 billion in 2016.

Shanghai-based Ele.me currently holds a valuation of $9.5 billion. According to Bloomberg, Baidu was also an investor in Ele.me. The buy-out deal with Alibaba includes all shares previously held by Baidu.

"Looking forward, Ele.me can leverage Alibaba's infrastructure in commerce and find new synergies with Alibaba's diverse businesses to add further momentum to the New Retail Initiative," said Alibaba Chief Executive Daniel Zhang in a statement.

In relation to its growing digital empire, Alibaba is heavily investing in companies that offer local, offline services. The business has been putting money into physical warehouses, retail department store chains, as well as other types of brick-and-mortar assets. Such investments are designed to support its online products and services.

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