Taking a bite out of China’s increasingly competitive food delivery market has proven to be too tough to chew for the German-based startup Delivery Hero.
The massive delivery service that started in 2008 in Sweden is valued at $3.1 billion and operating on five continents. But in China, where Delivery Hero has been open since 2012, the company says the competition for on-demand food is heating up.
Delivery Hero co-founder Niklas Ostberg told Tech Crunch, “The competition in China has become anything but sane, where companies have been flooding the markets with free food to users and no commission to restaurants.”
Delivery Hero said the investment required in China is too steep, and the company will be divesting over the next couple months.
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Recently, other Chinese companies have been investing heavily into the food delivery business. Alibaba invested $1.25 billion in local delivery service Ele.me in December of last year. Bloomberg reports the e-commerce giant now controls the food delivery startup valued at $4.5 billion.
And Chinese search engine Baidu is also looking to raise around $500 million for its own food delivery service, Baidu Waimai.
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But food delivery isn’t the only cutthroat market: Uber recently reported the company is losing $1 billion a year in the country amid fierce competition from local competitor Didi Kuaidi. And Apple pay landed in China last month but faces steep competition in the country from native apps like Alibaba’s Alipay and Tencent’s mobile wallet Tenpay.
While it’s a little too early to make predictions on how Apple or Uber will fare in the long run in China, at least when it comes to food business, the local competition can prove a little tough to swallow.