Amazon has poured $20 million in Yummy77, a food delivery site based in Shanghai. Yummy77 confirmed the funding in a post on Weibo and said it will use the capital to expand into new markets and help Amazon’s China site expand its selection of goods.
According to TechNode (TechCrunch’s partner site in China), this marks the first time that Amazon has invested in a Chinese company after launching in the country a decade ago. Amazon said it will hold a minority stake in Yummy77, which will continue to operate independently instead of being folded into Amazon China.
The fact that Amazon’s first investment in China is a food delivery site is unsurprising when you consider how quickly the online grocery market is growing, especially in large cities like Shanghai and Beijing.
Major e-commerce companies like Alibaba Group’s Taobao and JD.com run their own specialty food sites, which, like Yummy77, focus on fresh groceries and gourmet food items. Other competitors include Yihaodian.com, which Walmart owns a 51% stake in.
Furthermore, online grocery stores do not have to offer steep discounts in order to attract customers. According to a study by Kantar, overall purchases per customer are only 4% less expensive online versus brick-and-mortar stores.
TechNode reports that Yummy77’s sales exceed $100 million yuan (about $16 million) in December 2013 and it had 1 million registered users as of February.
Amazon’s other recent initiatives in China include expanding Amazon Web Services, a key part of its competitive strategy against Alibaba, which operates a cloud computing platform called Aliyun.