Alibaba logistics arm plans warehouse expansion

The logistics arm of Chinese e-commerce giant Alibaba is lining up a major warehouse expansion to streamline deliveries, devoting a large slice of long-term US$16 billion investment plans to adding new space.

The business, called Cainiao, will nearly quintuple warehouse space it owns now to about five million square metres next year - easily big enough to hold New York's Central Park - president Judy Tong said.

Founded two years ago, Cainiao seeks to give Alibaba a driving role in China's fragmented package delivery industry. In partnership with delivery businesses, it crunches reams of data on everything from order trends to delivery routes and weather patterns to increase efficiency.

"People may think that an internet company shouldn't have property but Cainiao cannot just be a pure data company," Tong said, referring to Alibaba's ownership of warehouses.

"It has to be an integrated company with data and an efficient logistics network. An app can't solve the problems of logistics."

Cainiao's warehouse space will be concentrated in eight to 10 cities and form the top tier of a network of warehouses. The lower tiers of this network will be entirely run by Alibaba's partners and businesses that sell on its platforms.

At Cainiao's launch in May 2013, the company announced plans to invest 100 billion yuan (HK$126 billion) over the next five to eight years. Wan Lin, vice-president at Cainiao, said on Thursday "quite a large portion" of that would go towards warehousing.

Tong said the crowded courier industry would likely face consolidation in the coming years with about three leading companies. A subsidiary of Fosun International bought a 10 per cent equity interest in Cainiao, formerly known as China Smart Logistics Network, when it was founded.

Earlier this month Alibaba took a minority stake in YTO Express (Logistics), one of Cainiao's 14 logistics partners. Tong said there were likely to be similar investments in the future, declining to give details.