Alibaba’s Cainiao creates US$1.24b fund with China Life to finance expansion in ‘smart’ logistics and storage facilities

Cainiao Network, the logistics arm of e-commerce giant Alibaba Group Holding, has set up an 8.5 billion yuan (US$1.24 billion) fund with China Life Insurance, the mainland's largest insurer, to finance the expansion of its nationwide network of “smart” handling and storage facilities.

Cainiao will operate and manage the assets and facilities. The fund’s creation is designed, the companies said, to help Cainiao maintain its asset-light strategy while gaining additional capital to cope with exploding delivery volumes, which Alibaba executive chairman Jack Ma Yun predicted earlier this year to grow tenfold to 1 billion per day within a decade.

Cainiao is also expected to transfer ownership of some of its existing logistics centres to the fund.

The fund will be dedicated to improving Cainiao’s logistics real estate projects and storage facilities and will not be invested into other companies.

Founded by Alibaba together with a consortium of Chinese logistics companies, Cainiao does not employ a single delivery driver, but operates a logistics information platform that links to a network of independent providers, warehouses and distribution centres.

Alibaba to deploy 1 million smart delivery vehicles to improve logistics efficiency

“Big data and algorisms sit at the heart of providing advanced delivery solutions, such as an optimised delivery routes,” said Lu Zhenwang, the chief executive at Shanghai-based Wanqing Consultancy.

“But to truly bring the game to the next level, Cainiao also needs infrastructure, such as logistic parks, warehousing and fulfilment centres, to further increase efficiency and lower costs for its partners.”

The fund’s creation comes at a time when gaining the upper hand on e-commerce competitors is more through providing an overall shopping experience rather than a pure fight on price and goods.

Delivery efficiency has become an vital part of that service.

Cainiao announced in May that it had strengthened its courier network by putting 1 million smart logistics vehicles into the market to cope with exploding delivery volumes in the future.

The vehicles, co-manufactured with other automobile companies including SAIC Motor Corp and Dongfeng Motor Corp, will optimise delivery routes for its couriers based on Cainiao’s own advanced big data and algorithms.

JD.com, Alibaba’s biggest e-commerce rival in China, has already introduced drones and self-driving delivery robots into its operation, to shorten delivery times

According to Alibaba’s last set of annual results ended March 31, 81 per cent of all items sold on its sites were delivered through the Cainiao network, up from 60 per cent the previous fiscal year.

Alibaba owns the South China Morning Post.