Alibaba Group

Alibaba forms consortium to build 100b yuan logistics network

Consortium will construct warehouses across the country to ensure fast delivery of packages

PUBLISHED : Wednesday, 29 May, 2013, 12:00am
UPDATED : Wednesday, 29 May, 2013, 2:51am

Alibaba Group, the mainland's largest e-commerce services provider, yesterday established a consortium to build an advanced, nationwide logistics infrastructure to support the country's fast-growing online shopping market.

The newly formed Cainiao Network Technology plans to invest as much as 100 billion yuan (HK$126.8 billion) over the next five to eight years to develop and manage the ambitious project, called the China Smart Logistics Network.

Led by Alibaba, the consortium's members include retailer Yintai Group, conglomerate Fosun International, and delivery services providers SF Express (Group), Shentong Express, Zhontong Courier, Yuantong Express and Shanghai Yunda Express.

Jack Ma Yun, the co-founder and executive chairman of Alibaba, was named the chairman of Cainiao. Yintai chief executive Shen Guojun will also serve as the consortium's chief.

Ma has said that he will focus on completing this logistics project, which is expected to support up to 10 trillion yuan in annual online sales and enable deliveries to be made within 24 hours to a customer's doorstep.

Financial support for developing the logistics network will come from two strategic partnerships: one led by China Life Insurance and the other by China Citic Bank.

Cainiao, which means "rookie" in Chinese, will initially build a national network of warehouses over the next five to seven years. These will have a total storage space of three million square metres, or the equivalent of 356 soccer fields.

While other mainland e-commerce services providers are investing in proprietary logistics operations, Cainiao brings together industry partners which are experts in their respective fields to solve bottlenecks.

Alibaba spokesman John Spelich said: "We will build an information-sharing platform for all logistics players in China."

In contrast, rival e-commerce provider 360buy Jingdong Mall plans to spend about 10 billion yuan by next year to further expand its own logistics network. Last year, the firm spent 3.6 billion yuan on logistics-related projects.

A JP Morgan report said "well-built logistics is one of the key factors to drive further growth" in the mainland's e-commerce market. It added that online merchants and e-commerce platforms, such as Alibaba business-to-consumer operation TMall.com "can lower per-order delivery cost, shorten delivery time and expand into tier-2 and tier-3 cities".

It forecast the gross merchandise value of the mainland's online shopping market in 2015 will reach US$436 billion, accounting for 8.5 per cent of the country's total retail sales.