Jack Ma

Can Jack Ma's Cainiao project deliver on its promise?

PUBLISHED : Saturday, 13 July, 2013, 12:00am
UPDATED : Saturday, 13 July, 2013, 9:23am

Cainiao, Putonghua slang for a rookie, is not a good word to describe Jack Ma Yun.

But that's the name of the Alibaba chairman's ambitious new project, and he faces a tough road achieving its mission - getting any consumer's purchase to their doorstep within 24 hours, anywhere on the mainland.

Ma stepped down as Alibaba's chief executive on May 10, a decision that surprised many. It took him just 18 days to announce his return.

Cainiao is a consortium of the country's largest e-commerce company, Alibaba, retailer Yintai Group, conglomerate Fosun International and several leading delivery services on the mainland, including SF Express and Shentong Express.

Alibaba owns 43 per cent of the venture with an investment of 2.15 billion yuan (HK$2.7 billion) and Ma is its chairman. Cainiao plans to invest as much as 100 billion yuan over the next five to eight years to develop and manage the China Smart Logistics Network.

Less than half the parcels sent on the mainland are delivered within three days, according to Alibaba statistics.

"For e-commerce firms, the three most important infrastructure items are information flow, cash flow and delivery," Ma said.

For e-commerce firms, the three most important infrastructure items are information flow, cash flow and delivery
Jack Ma

Guosen Securities analyst Eric Qiu Lin said Alibaba's dominance of e-commerce on the mainland meant it had valuable customer data, such as their shopping habits and creditworthiness. With AliPay, Alibaba tackled the issue of cash flow. The only bottleneck left to hamper the growth of e-commerce was an undeveloped delivery network.

Every minute, more than 8,300 purchases are made on Alibaba's two portals - customer-to-customer platform Taobao and business-to-customer site Tmall. The two sites generate 12 million parcels a day, accounting for more than 60 per cent of parcel deliveries on the mainland.

Cainiao won't build a logistics network but establish an innovative system based on internet technologies and ideas to provide more efficient services to logistics companies.

"I'm confident that the logistics network should enable a courier to reach a fourth-tier city buyer in 24 hours. But for users in really remote areas like Xinjiang it is a very challenging target."