Alibaba to build smart logistics system
June 20, 2013 Category Logistics, Logistics industry
Alibaba Group, China’s largest e-commerce company, is leading a group of investors with plans to build a CNY100 billion “smart” logistics system to connect existing networks and provide faster, more efficient delivery of goods ordered online. The new company, called Cainiao Network Technology Co, was unveiled in Shenzhen in May. “Cainiao” is a popular term on the internet in Chinese, referring to a rookie lacking experience. “The new company is named Cainiao because we’re a group of newcomers in the logistics industry,” said Shen Guojun, Chairman of Yintai Holdings Co, one of the investors in the project. “We will learn and grow together with start-up firms.” Total investment in the project could reach CNY300 billion. The project is expected to link hundreds of domestic cities. “We’ll dedicate at least 10 years to developing the new company and hope to reduce the logistics cost for privately-owned companies and small vendors,” said Jack Ma, Chairman of Alibaba, who will also chair the new company. Improved logistics services is a key element for growth in the e-commerce industry. The new venture will become a platform connecting existing logistics networks with internet infrastructure so that data about packages and delivery information can be easily accessed and managed, said Tong Wenhong, Vice President of Alibaba. The initial focus will be on cities where logistics services are less developed and online orders may take days to arrive. Construction of warehouses and logistics centers is starting in a dozen cities.
Alibaba aims to provide a full industry chain of services for online vendors so that they can sell merchandise, advertise, receive online payments and manage delivery services on the platform. Other shareholders in the project include the Fosun Group, China’s largest privately-owned conglomerate; major courier firms including SF Express (Group), Shentong Express, Zhontong Courier, Yuantong Express and Shanghai Yunda Express; and financial institutions such as China Life Insurance Group and CITIC Group, the Shanghai Daily reports. The warehouses to be built will have a total storage space of three million square meters, or the equivalent of 356 soccer fields. China’s logistics costs accounted for 18% of its gross domestic product (GDP) in 2012, compared with just 8% in the United States, according to the China Logistics Association. Alibaba’s project may be interpreted as a fight-back against Jingdong Mall, another e-commerce giant, which has built a combined inventory space of more than 1 million square meters and poured CNY3.6 billion into its logistics system in the past year, said Xu Yong, Analyst with China Express and Logistics Consulting, an independent logistics think tank. A combined 60% of all express-delivered parcels in 2012 – or 12 million units per day – were from Alibaba’s two major trading platforms, Taobao and Tmall. These figures propelled Xu to regard the network as a possible attempt to achieve a monopoly. Taking part in the network may also diminish the couriers’ chances to cooperate with other e-commerce firms, Xu added.
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