Alibaba steps up logistics initiative amid international expansion

Firm shows focus on e-commerce as it vows to build new smart network with postal system

PUBLISHED : Friday, 13 June, 2014, 5:34am
UPDATED : Friday, 27 June, 2014, 7:36pm

Following an audacious investment spree that extended into movie production, mobile messaging and even a mainland football club, a rush of new deals by Alibaba shows it remains focused on strengthening its flagship e-commerce operation.

Hangzhou-based Alibaba, the leading online retail services provider on the mainland, yesterday unveiled a strategic cooperation pact with China Post to jointly develop a "smart" logistics network in the country.

The two sides agreed to deploy resources in the areas of warehousing, processing and building a "public services platform" that integrates China Post's massive infrastructure and Alibaba's more than 10,000 service outlets across the mainland.

Before its initial public offering in the United States, Alibaba has launched its own shopping site there called 11 Main Marketplace, developed by US subsidiaries Auctiva and Vendio.

The e-commerce giant also agreed to collaborate with the government of Italy, through its Ministry of Economic Development, to foster greater trade opportunities for Italian brands in China. It marked the second trade-related pact forged by Alibaba with a foreign government, following its cooperation deal with UbiFrance and the Invest in France Agency this month.

"Alibaba has shown that it is keen to develop a vast logistics infrastructure to support the mainland's fast-growing online shopping market, while preparing the company for international expansion," said Ricky Lai, an analyst at Guotai Junan International. "These developments could help increase Alibaba's valuation."

In December, Alibaba accelerated efforts to expand its logistics capabilities through its HK$1.86 billion deal to buy a stake in Goodaymart, the logistics arm of Haier Electronics.

Following lead founder Jack Ma Yun's vision, Alibaba also formed the Cainiao Network Technology consortium in May last year with various courier services providers. This enterprise plans to invest as much as 100 billion yuan (HK$124 billion) over five to eight years to build a mainland-wide logistics network.

The pact with China Post, however, could help drive further domestic and international expansion for Alibaba. The mainland postal agency's resources include 52,000 postal outlets, 40,000 Postal Savings Bank branches, 150,000 postal delivery workers, 50,000 direct-sales staff, 80,000 postal vehicles, 433 train carriages and 18 cargo aircraft.

According to iResearch, the size of the mainland's online retail market is forecast to reach 4.45 trillion yuan by 2017 with an estimated 460 million online shoppers. Last year, the market was worth 1.84 trillion yuan, with 300 million shoppers.