China's Internet giant Baidu Inc. (BIDU - Free Report) invested $100 million in Chinese online laundry firm Edaixi, as part of its efforts to position itself in the fast-growing “online to offline (O2O)” space. Existing investors Matrix Partners China and SIG also participated in the round of funding.
Edaixi is an O2O laundry mobile app created by Beijing-based laundry brand Rong Chang in 2013. It offers an on-demand laundry pickup service for busy urban citizens. Users can place a request, choose pickup times and make the payment on Edaixi’s app or its WeChat-based service account.
The platform will then arrange for the pick up of soiled clothes, their cleaning and subsequent delivery to the customer’s doorsteps in 72 hours. The company has around five million customers in 16 Chinese cities, and handles about 100,000 orders per day.
The company raised $3.2 million of angel investment from Rongchang Group Co., Ltd. and Tencent Holdings Limited in July last year. With the new funding the company plans to reduce return hours from 72 hours to 48 hours.
O2O is a fast growing sector in China and is viewed as the future model of e-commerce in the country. Growth in the space is aided by the shift to smartphones from personal computers. Therefore Internet companies need to offer as many services as possible to customers through their smartphones, which will therefore be a new source of income. Hence, Chinese companies and investors are currently investing in the space.
This isn’t the first time that Baidu is trying to venture into O2O services. Baidu offers O2O services such as food delivery and movie tickets where it hasn’t gained much traction. It still lags behind its competitors, Ele.me, a Tencent-backed platform in the food takeout sector and Maoyan, an online movie-ticketing site operated by Meituan.
In June, it said it will invest $3.2 billion over the next three years to boost its O2O offerings in collaboration with group-buying website Nuomi.
Investors don’t seem to be too happy with Baidu’s steps as there could be a resultant risk to its gross profits.
But the latest step shows that it isn’t planning to slow down its drive to consolidate its position in the O2O space.
Baidu holds a Zacks Rank #5 (Strong Sell). Better-ranked stocks in the technology sector include Amazon.com. Inc. (AMZN - Free Report) , MeetMe, Inc. (MEET - Free Report) and United Online, Inc. . All three carry a Zacks Rank #1 (Strong Buy).
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