The rapid decline of mobile internet dividends has made major companies more rational in their pursuit of new trends. When previously booming sectors become overcrowded, these companies often pivot back to older, once-popular trends, as innovation carries increasing risks, and large companies are growing more averse to these risks.
For example, Alipay has once again launched the UGC (User-Generated Content) creation feature in its Life Account section, marking yet another push into the content space. Meituan has introduced “Tuan Mai Mai,” reigniting the community group buying wars, while SF Express is eyeing the live e-commerce sector and is busy expanding its supply chain.
Recently, Gaode has also set its sights on a business that is neither trendy nor new: errand services. The Gaode Map app has quietly rolled out the “Gaode Miao Song” service in cities such as Beijing, Wuhan, and Hangzhou, following a third-party aggregation model similar to ride-hailing. Currently, it only integrates with Ele.me’s Fengniao Errand service.
According to a report by iiMedia Research, the domestic errand service market is expected to reach 66.5 billion RMB by 2025, maintaining double-digit annual compound growth rates in recent years. The future indeed looks bright. However, as a core player in Alibaba’s local services, Gaode’s ambitions likely extend far beyond this 66.5 billion RMB market.
Gaode as the Vanguard, Alibaba Local Services in Pursuit
Without large-scale promotion or a full launch, “Gaode Miao Song” seems more like a “sneak attack.” Currently, the service offers only two features: “Help Me Pick Up” and “Help Me Deliver,” and it has not been given a primary entry point on the home page. Users can access the ordering page through keyword searches. The discounts are modest, with a first-order discount of 5 RMB, indicating a restrained investment by the platform.
When asked about the details of this service, a Gaode spokesperson confirmed that “Gaode Miao Song” would follow a third-party aggregation model to build an open ecosystem, aligning with publicly available information. Gaode’s reason for entering the errand service industry was to “respond to user demand.”
This reasoning is not without merit. As an extension of instant delivery, the errand service industry may not be large, but it aligns with market trends and is seeing growing user loyalty.
In the early years, errand services were predominantly used in office settings for urgent intra-city deliveries of documents and small items. But now, the scope of errand services has expanded to various fields, especially those catering to end consumers. Statistics from iiMedia Research show that 38.4% of users use errand platforms to pick up or deliver forgotten items, while 37.3% use them to purchase items directly.
The growing dependency of Gen Z—the loyal supporters of the “lazy economy”—on errand platforms is particularly noteworthy. Surveys indicate that 37% of young users aged 19-25 use errand services at least 1-4 times per month, with the majority located in first- and second-tier cities. The services they seek are not limited to delivery and pickup but also include emerging tasks like queueing on behalf of others.
Beyond responding to user demands, Gaode also has its own need to expand its service range.
Following Alibaba’s “1+6+N” organizational restructuring, which allows for the spin-off and listing of its business groups, Taotian Group, Cainiao, Alibaba Pictures, Alibaba Cloud, International Digital Commerce, and the Local Services Group have all embarked on a race to go public. The rationale is simple: after leaving behind the era of collective resources, these groups need to fend for themselves, striving for high valuations and more funding through public listings. Consequently, relationships between the various business groups have become more complex.
Currently, Alibaba Cloud and Cainiao have taken the lead, having secured board approval to proceed with their IPOs, while the still-loss-making Alibaba International Digital Commerce Group is also rumored to be planning a listing. Taotian Group’s situation is unique, as its self-sufficiency, influence, and internal standing are unquestionable, making its IPO less crucial. This leaves Alibaba Pictures and Local Services lagging behind, both in urgent need of catching up.
Compared to other business groups, Alibaba Local Services has seen relatively few internal adjustments in recent years and continues to pursue a strategy of simultaneous focus on in-home, in-store, and destination services, with Ele.me, Gaode, and Fliggy as its core pillars. Among these, Gaode has been the standout, receiving the most resources from the group.
Of Alibaba Local Services’ three flagship apps, Gaode is indeed closest to the users and has the most room for expansion. Gaode has long ceased to be just a map app, and it is no longer limited to the travel sector, gradually expanding into various local service segments.
The launch of “Gaode Miao Song” is merely a signal; Gaode and Alibaba Local Services’ expansion has not yet reached its peak.
A Decade with Alibaba: The Evolution of Gaode into a “Super App”
Reflecting on Gaode’s early days within Alibaba, there was little connection to local services, and even its main business of navigation was not performing well.
Gaode’s last financial report before being privatized by Alibaba (Q3 2013) showed a net loss of $6.7 million, with marketing and R&D expenses surging by 150% and 75% year-on-year, respectively. The situation was far from optimistic. At the time, Baidu had already acquired Nuomi and merged it with Baidu Maps, and Tencent and Meituan were making moves in the travel industry, leaving Gaode surrounded by competition.
After the acquisition, Alibaba appointed a key figure to lead Gaode: Yu Yongfu. As an executive most familiar with local services and O2O within Alibaba, Yu made a surprising decision after assuming the role of Gaode’s president: he cut all O2O services and refocused on Gaode’s core business of navigation, avoiding direct competition with Baidu.
Yu later recalled that this decision was difficult but necessary: “If we didn’t act quickly, Gaode would be in danger.” He believed that O2O at that time had not yet moved beyond the inertia of e-commerce thinking and lacked true understanding of user needs. By stabilizing its core business and retaining users, Gaode could then extract valuable insights from user travel data, making other services meaningful.
In hindsight, Yu’s decision was undoubtedly the right one. Baidu Nuomi flopped after investing 20 billion RMB, eventually shutting down in December 2022, while Gaode’s improved LBS+O2O model became increasingly successful.
Opening the Gaode Map app now reveals a wide array of services.
It is no exaggeration to say that Gaode has the potential to become a “super app,” akin to WeChat, Alipay, and Meituan.
Navigation, ride-hailing, and public transportation/flight information queries are the basics. Features like electric vehicle screen projection, driving cruise control, and corporate business car services are also understandable as they fall under travel services. But Gaode’s offerings extend far beyond that.
As an extension of travel services, Gaode provides smart insurance products like “Smart Car Insurance” and “Travel Protection,” as well as automotive after-sales services such as discounted fueling and car washes. Additionally, there are various lifestyle services seemingly unrelated to travel: mobile phone top-ups, medicine delivery, restaurant reservations, and even online housing rentals and medical appointments.
Since being designated as a core project by Alibaba Local Services in 2022, Gaode has accelerated its penetration into the local services sector. In August this year, Gaode partnered with over 4,000 Apple authorized resellers nationwide to launch the “Buy on the Go, Pick Up Nearby” service, continuing to explore “third living service scenarios.” Earlier, Gaode also collaborated with Starbucks to launch the “Street Pickup” service, covering over 1,000 stores across the country.
In Gaode’s vision, the map is merely a carrier and a gateway to traffic—a gateway filled with potential. After all, travel is just one aspect of life services, inherently connected to other aspects.
Simply put, travel is a means, while consumption is the end goal. When users open Gaode to navigate to a destination, they might be going out to dine, socialize, or vacation at a hotel or scenic spot. Since Gaode already has the navigation function and controls the traffic source, why not capture the downstream traffic as well?
It must be said that Gaode’s approach bears striking similarities to Robin Li’s envisioned LBS+O2O model. LBS (Location-Based Services) involves using the map’s navigation function to capture traffic and then directing it to various O2O services. Baidu Nuomi’s failure was due, in part, to its failure to truly understand user needs, instead “creating demand” through heavy subsidies. Additionally, its timing was unfortunate, coinciding with Meituan’s rise.
In contrast, Gaode’s current situation is much more optimistic. However, with Baidu Nuomi’s precedent, caution is still necessary. This new errand service could be a litmus test to see how far Gaode’s boundaries can be extended.
Can Alibaba Local Services Harness Synergy Amidst Complex Business Lines?
When analyzing a business’s prospects, two key questions arise: externally, can it withstand competition and capture industry growth? Internally, can it concentrate core resources and fully leverage its strengths?
The external factor seems manageable. While the errand service industry has both new and established players, the competition is not yet cutthroat, and there are few platforms adopting an aggregation model, leaving Gaode with room to capture market share.
The main players in the errand service market fall into two categories: comprehensive platforms like Meituan Errands, Ele.me Errands, and Dada Group, which cover a range of services such as intra-city delivery, purchasing on behalf of users, and errand running; and single-service platforms like SF Intra-city, which focuses on intra-city delivery of B2B business items.
SF Intra-city dominates the B2B segment, while the C2C market is highly fragmented. Dada Group, backed by JD.com, connects with large supermarkets and shopping centers and has a loyal user base, while Meituan and Ele.me excel in traffic and last-mile delivery, offering the broadest range of services. Gaode’s collaboration with Ele.me and its affiliated errand platform reduces costs and shares risks, benefiting both parties.
The internal challenge may be more complex.
The longstanding issue for Alibaba Local Services, and even the broader Alibaba Group, has been the difficulty of forming synergy due to the multitude of business lines, blurred boundaries between competition and collaboration among different teams, and the vast scope of local services, which involves a wide range of projects. Frequent organizational changes and communication barriers between teams have also contributed to this problem.
Take the fresh food e-commerce sector, for example. Beyond short-lived products like “Cai Huashuan,” Alibaba has deployed multiple teams, including Taoxianda, Hema, and Taocaicai, in this space. These teams belong to different business groups, have separate reporting lines, and different executives in charge, yet they target overlapping customer bases and end up competing internally, leading to unnecessary resource diversion.
The good news is that outside of the Local Services Group, other Alibaba business units have not heavily ventured into the errand service space, so the issues seen in fresh food e-commerce are unlikely to repeat. More importantly, Gaode has always adhered to an aggregation model, building an open ecosystem that attracts traffic and facilitates transactions through its platform advantage, avoiding conflicts of interest with the platforms it hosts—regardless of whether those platforms have an Alibaba background.
The only remaining issue for the higher-ups might be the internal allocation of resources and improving operational efficiency.
There are rumors that Yu Yongfu, in his early days of managing Gaode, was very dissatisfied with the company’s internal efficiency. At that time, Gaode was simultaneously focusing on multiple projects, such as in-car connectivity and mobile applications, requiring significant resources. However, the back-end departments, such as technology and finance, struggled to keep pace, and Yu found the lengthy reporting lines and aimless discussions in meetings unbearable.
Yu’s solution was to eliminate traditional weekly meetings, replace them with a project team system, and later establish a “class committee” structure with senior executives like Chen Yonghai, Wei Dong, Dong Zhennin, and Tian Mi overseeing different projects, a system that has persisted for many years. Although Yu Yongfu now has a heavier workload and is no longer on the front line of Gaode’s management, the rules he set and the emphasis on efficient operations that he instilled in the team continue to influence every Gaode employee.
Looking back, it’s been ten years since Gaode joined the Alibaba family. Although Alibaba has not disclosed detailed revenue figures for Gaode, its user base growth is evident, and its valuation has undoubtedly risen. Gaode, which was not yet profitable when it joined Alibaba, has certainly proven its worth, dispelling doubts about its premium acquisition.
Now, it may be time for Gaode to repay Alibaba’s trust and take on a leading role in the local services sector.
Post time: Aug-21-2024