Eliza Wong
Executive Summary
- Alibaba’s Amap launches ‘Scan the Street’ list using AI algorithms and real user behavior data to challenge Meituan’s dominance in local services recommendations
- The move signals Alibaba’s comprehensive offensive in China’s $1.8 trillion local services market, backed by planned $7 billion investment
- Market structure shifting from Meituan-Douyin duopoly to three-way battle as Alibaba leverages its ecosystem advantages
- Amap’s 890 million MAU provides massive traffic entry point but faces challenges converting navigation users to local services consumers
- Industry experts predict intensified competition will pressure margins but ultimately benefit consumers through improved services
Alibaba’s Strategic Pivot in Local Services Warfare
The launch of Amap’s ‘Scan the Street’ list represents far more than another feature update—it signals Alibaba’s most aggressive move yet in China’s brutally competitive local services market. One week after its quiet debut, the AI-powered recommendation system has generated substantial buzz across Chinese social media platforms, with users debating everything from list accuracy to regional authenticity.
Amap’s sudden content push comes at a critical juncture for Alibaba’s local services strategy. With Meituan dominating food delivery and Douyin capturing entertainment-based local commerce, Alibaba has struggled to find its footing despite controlling significant assets including Ele.me, Fliggy, and now Amap. The ‘Scan the Street’ list represents a new approach that leverages Amap’s unique position as China’s dominant navigation platform.
The Genesis of Amap’s Content offensive
Amap’s development team moved with unusual speed in deploying and iterating the new feature. Initial user testing revealed strong utility for travel planning, with the platform automatically generating curated lists of must-try foods, popular attractions, and trending spots based on destination selection. Within four days, Amap expanded functionality to include pre-packaged ‘citywalk’ routes and announced upcoming dish-specific rankings—all reportedly in response to early user feedback.
The operational execution has been notably sophisticated. From pre-launch teasers about ‘mysterious projects under development’ to rapid post-launch iterations and aggressive social media distribution, Amap has demonstrated content operational capabilities more commonly associated with entertainment platforms than mapping services. The platform heavily emphasizes its AI algorithms and ‘never commercialized’ positioning, directly attacking perceived weaknesses in Meituan’s user review system.
Amap’s Strategic Role in Alibaba’s Local Services Ecosystem
Amap’s ‘Scan the Street’ list launch must be understood within Alibaba’s broader local services reorganization. Contrary to market expectations that Taobao would lead Alibaba’s store-based services offensive, Amap emerged as the surprise vanguard. This positioning makes strategic sense given Amap’s existing integration with Ele.me’s store services business (formerly known as Koubei).
The store services business model fundamentally revolves around selling digital coupons, with profits primarily derived from merchant marketing expenditures. Amap’s initial offering doesn’t directly monetize but rather functions as a free value-add to users—a classic customer acquisition strategy in China’s competitive internet landscape.
Alibaba’s Historical Challenges in Local Services
Alibaba has historically struggled in local services despite early advantages. The company acquired Koubei as early as 2006, invested in Meituan’s Series B in 2011, purchased Amap in 2014, and acquired Ele.me in 2018. Despite this impressive portfolio, internal integration challenges and insufficient synergy with core e-commerce operations prevented Alibaba from capturing market leadership.
The numbers tell a sobering story: Ele.me retains approximately 30% market share in food delivery, Fliggy’s OTA market share declined from 21% in 2017 to 8% in 2024, and various community group buying initiatives failed to gain traction. The fundamental issue has been efficiency—successful local services platforms excel at matching fragmented demand with localized supply, developing operational capabilities that become structural advantages.
The New Competitive Dynamics in China’s Local Services Market
The competitive landscape has shifted dramatically with Amap’s entry. Previously characterized as a Meituan-Douyin duopoly, China’s local services market now faces a three-way battle royale. This escalation comes despite recent indications that competition was moderating as players focused on profitability rather than growth at any cost.
Douyin’s own journey illustrates both the opportunities and challenges in local services. After launching group buying features five years ago, Douyin achieved approximately 300 billion RMB in gross transaction value (GTV) by 2023 through aggressive subsidies. However, the platform discovered that local restaurant merchants have limited supply elasticity and thin margins, making deep discounts unsustainable. Douyin consequently refined its strategy to focus on higher-value segments including chain restaurants with substantial marketing budgets and travel-related services better suited to video content.
Meituan’s Strategic Response
Meituan has responded to competitive pressures by integrating its store-based and delivery services into a Core Local Commerce group under CEO Wang Puzhong. This reorganization enabled improved resource utilization and innovation, exemplified by ‘Shen Qiang Shou’—a hybrid offering that allows customers to use the same vouchers for both delivery and store pickup.
Meituan’s strongest defense remains its entrenched position with small and medium-sized merchants and higher-frequency service categories. The platform also benefits from Dianping’s user review ecosystem, which reportedly contributes approximately one-third of Meituan’s store services revenue despite relatively modest daily active users.
The Economics of Local Services Competition
The resurgence of aggressive competition in local services reflects changing strategic calculations among tech giants. JD.com’s Richard Liu provided crucial insight when explaining his company’s food delivery ambitions: 40% of food delivery users also purchase JD.com e-commerce products, making customer acquisition through delivery potentially more cost-effective than buying traffic from Douyin or Tencent.
Alibaba appears to have adopted similar logic. The company now views local services not as standalone businesses but as valuable traffic sources for its broader ecosystem. This represents a significant strategic shift from treating local services as independent operations or mere extensions of e-commerce.
Alibaba’s Ecosystem Advantage Theory
Alibaba’s latest financial results support this strategic pivot. The company reported 120 million peak daily orders in August with weekend averages reaching 80 million orders—figures that approach industry leadership scale. Perhaps more importantly, Taobao’s ‘Flash Purchase’ service reportedly drives 20% of Taobao’s daily active users, demonstrating significant cross-traffic benefits.
During recent earnings calls, Alibaba executives emphasized that they ‘will not look at food delivery profitability separately’ and consider Flash Purchase ‘very successful’ and ‘exceeding all expectations.’ This willingness to sustain losses in local services while capturing ecosystem value represents a fundamental change in competitive dynamics.
Amap’s Strategic Position and Challenges
Amap represents one of Alibaba’s most valuable assets in the local services battle. Under former CEO Yu Yongfu’s leadership, Amap evolved from a pure navigation tool to a ‘super app’ aiming to become ‘the best carrier for the entire real world.’ The platform’s daily active users grew from 30 million to 170 million, with monthly active users reaching 890 million—making it China’s dominant mapping service.
Amap has gradually incorporated numerous local services features including ride-hailing, hotel bookings, travel services, and dining recommendations. The integration of Koubei’s store services business in 2023 accelerated this transformation, with initiatives like ‘Amap Treats’ (similar to Meituan’s free trial program), merchant coupons, and innovative services like Starbucks’ ‘Curbside Pickup’ and Apple authorized dealers’ ‘Buy Now, Pick Up Later’ offerings.
The Commercialization Challenge
Despite impressive user metrics, Amap has struggled to monetize its local services ambitions effectively. Industry estimates suggest Douyin achieved approximately 560 billion RMB in lifestyle services GTV in 2024, while Meituan’s store services GTV reached 900 billion to 1 trillion RMB. Amap’s contribution remains minimal, with most revenue still derived from advertising and ride-hailing services.
The fundamental challenge lies in converting navigation intent into commercial action. While Amap owns the ‘destination’ mindset, transitioning users from route planning to dining decisions or entertainment bookings has proven difficult. Users may appreciate Amap’s new recommendation features but still turn to Meituan for reviews and coupons or Xiaohongshu for personal experiences when making final decisions.
The Road Ahead for China’s Local Services Market
Amap’s ‘Scan the Street’ list represents an impressive opening salvo in Alibaba’s renewed local services offensive. By leveraging AI to analyze real user behavior data rather than relying on potentially manipulated reviews, Amap has found a compelling differentiation point. The platform’s subsequent deployment of 200 million RMB in ride-hailing coupons and 950 million RMB in consumption vouchers demonstrates serious commitment to acquiring users.
However, sustainable success will require more than clever features and generous subsidies. Alibaba must address fundamental operational challenges including merchant acquisition, service quality control, and seamless integration across its various platforms. Early signs suggest potential organizational challenges, with reports indicating Taobao rather than Amap teams leading merchant acquisition efforts—echoing previous structural issues that plagued Alibaba’s local services initiatives.
Strategic Implications for Investors
The market has clearly endorsed Alibaba’s new approach. Following its earnings announcement and local services strategy update, Alibaba’s stock surged 18% while Meituan declined nearly 20%. This dramatic reaction reflects investor belief in the ecosystem value theory and recognition that Alibaba finally has a coherent local services strategy after years of false starts.
For the broader market, intensified competition likely means continued pressure on profit margins but accelerated innovation and improved consumer experiences. The eventual outcome might not be winner-take-all but rather segmentation with each platform leveraging its distinctive advantages: Meituan’s operational excellence, Douyin’s entertainment traffic, and Alibaba’s ecosystem integration.
Navigating the New Local Services Landscape
Alibaba’s comprehensive offensive through Amap’s ‘Scan the Street’ list marks a turning point in China’s local services competition. By leveraging AI algorithms and real user behavior data, Amap has found a compelling angle to challenge Meituan’s review-based recommendation system. More importantly, Alibaba appears to have developed a coherent strategy that leverages its ecosystem strengths rather than fighting on Meituan’s terms.
The road ahead remains challenging. Amap must convert navigation users into local services consumers, Alibaba must integrate its various platforms effectively, and the entire organization must execute with operational excellence that has historically been Meituan’s advantage. But for the first time in years, Alibaba has demonstrated both the strategic clarity and financial commitment to compete seriously in China’s massive local services market.
Market participants should monitor several key metrics in coming quarters: Amap’s local services transaction volume, Taobao-Amap cross-traffic patterns, merchant adoption rates across platforms, and any signs of margin stabilization as the initial subsidy phase evolves toward more sustainable competition. The battle for China’s local services market has entered its most interesting phase yet.
