Does DiDi Have the Best Local Delivery Model?
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The most important thing in tech today is …
the DiDi IPO, and the question of the best local delivery business model.
China-based DiDi has global ambitions, and while it started with ride hailing (delivering people), it has expanded into local freight, food delivery, bikes and e-bikes, financial services, community group buying and more. It’s still developing autonomous driving and building its own electric vehicles.
Uber meanwhile, with similarly global ambitions, has narrowed its focus, somewhat: It’s mainly delivering people, food and freight, and has spun off its autonomous driving and short-haul helicopter efforts.
Don’t be fooled by formalities, though — Uber and DiDi have similarly partnered to bring outside investment to their longer-term projects. It’s just while Uber has structured these as spin-offs, DiDi has kept a little more control, though it’s not clear exactly how much. From the F-1:
For example, the entities engaged in our community group buying, bike and e-bike sharing, autonomous driving and intra-city freight businesses have each issued equity interests in their share capital in the course of their independent financings. We may lose control of these subsidiaries as a result of such financings, which may result in the deconsolidation of their businesses.
Why is this important?
Five years ago it seemed obvious that local delivery was a scale game, when it comes to both items and geographies. Whoever could deliver the most things in the most cities in the most countries would win. On the occasion of the DiDi IPO — the company from the biggest country, trying to deliver the most things — it’s worth revisiting that idea. Now, scale is both a blessing and a curse.
During the pandemic, we saw the surge in demand for DoorDash, a local delivery company more narrowly focused than DiDi and Uber — it strictly delivers things, not people. As the U.S. has begun recovering from the pandemic, we’ve seen DoorDash simplify the way it charges restaurants for services (in April), and push into grocery delivery just last week. It’s too soon to draw conclusions, but it might be that DoorDash’s focus is allowing it to pull ahead of bigger rivals who are spread thinner.
Then at the other end of the spectrum we have DiDi, which is still boldly playing the scale game on multiple tracks — in items delivered, geographies, and even technologies. Many of those nascent businesses will continue to need capital, though capital is likely to get more expensive over the next couple of years.
Will DiDi’s scale allow it to learn faster from a huge pool of data, and attract more capital at a lower cost than more focused rivals? Or will its multiple bets force it to focus on fewer things, and leave equity investors holding less value than they thought? Everyone investing in a public DiDi, place your bets.
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