Beijing (PingWest)—Chengxin Youxuan, the community group buying business of Chinese ride-hailing giant Didi Chuxing, is considering raising $4 billion to boost its growth, Bloomberg reported, citing people familiar with the matter.
According to the source, Didi is considering injecting approximately $3 billion into Chengxin Youxuan and also working with advisers to raise about $1 billion from outside investors for the rapidly growing business.
Details of Chengxin Youxuan’s fundraising such as the size of the deal could still change as considerations are at early stage, the source said.
Community group buying service has grown in popularity among Chinese bargain seekers, therefore Internet giants have started competition in this field. It induces neighboring residents to organize to put orders of grocery and fresh produce in bulk for discounts. To make the offer even worthier, the operator gathers and ships all packages to one location to save the shipping cost.
At present, Chengxing Youxuan, Freshippo (Alibaba's brick-and-mortar supermarket chain), Meituan (the on-demand delivery giant), Pinduoduo (China's third-largest e-tailer), and Xingshengyouxuan (a startup supported by Tencent and JD.com), are the major competitors in the sector.
However, the continued price wars of these top companies have caused some social problems, including employment issues, so China's top market regulator has issued warnings.
On December 22, the State Administration for Market Regulation (SAMR), along with the Ministry of Commerce, summoned representatives from Alibaba Group, Tencent, JD.Com, Meituan, Pinduoduo, and Didi Chuxing. SAMR vowed to maintain a fair market competition environment, mandating the community group-buying business to be under strict supervision. Dumping groceries by pricing power is banned. Also, data-driven price discrimination is no longer tolerated.