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Workers sort packages after the "Singles Day" shopping festival at a delivery company in Hengyang in China's central Hunan province. Photo: Agence France-Presse

Alibaba extends New Retail push with US$693 million investment in STO Express

  • Many of China’s courier firms have risen together with the rapid growth of e-commerce in the country
  • Alibaba wants a strong logistics network so that it can deliver goods as fast as possible
E-commerce

Alibaba Group Holding’s latest investment in Chinese courier company STO Express comes as China’s largest e-commerce company looks to bolster its New Retail strategy of integrating online and offline shopping.

The 4.66 billion yuan (US$693 million) investment in Shanghai-headquartered STO Express is Alibaba’s fourth investment in an express courier company. Before STO Express, Alibaba had taken minority stakes in Chinese courier firms YTO Express, ZTO Express and Best Inc.

New York-listed Alibaba already operates logistics affiliate Cainiao Network, which runs a platform that does everything from digitising and standardising waybills to route optimisation for couriers.

Alibaba’s investment for an almost 15 per cent stake in STO Express comes as the logistics sector becomes a key area of development for China, as a crucial part of its infrastructure and economy.

Many of China’s courier firms have risen together with the rapid growth of e-commerce in the country, with seven such firms going public in 2017 alone. In 2018, total parcel volume reached almost 51 billion.

“We will deepen our existing collaboration with STO in technology, last-mile delivery across China and New Retail logistics,” said Alibaba in a statement.

“This investment is a step forward in our pursuit of the goal of 24-hour delivery anywhere in China and 72 hours globally.”

Alibaba, the parent company of the South China Morning Post, has said its New Retail strategy is a key growth engine for the company in the future.

The Hangzhou-headquartered firm has spent billions investing in offline retailers, such as Sun Art Retail Group and Intime department stores, as well as in the local services industry, which includes food delivery firm Ele.me and restaurant platform Koubei.

The idea is that the future of retail lies in allowing consumers to shop whenever they want, whether from the comfort of their own home or in an offline store. As such, Alibaba needs a strong logistics network, so that it can deliver goods as fast as possible.

Alibaba’s line of Freshippo supermarkets – better known as Hema on the mainland – do just that. When Alibaba acquired Ele.me, its fleet of three million riders became an important resource, and they are able to deliver Hema orders to customers within just half an hour.

Alibaba’s biggest rival in China, online retailer JD.com, has also invested heavily in logistics, although the Beijing-based company has sought to build its own network of warehouses and deliverymen.

In February, JD.com confirmed reports that it planned to lay off 10 per cent of management staff at the vice-president level and above this year. But just days later the company emphasised that it planned to hire another 15,000 employees – two-thirds of which will work for its delivery unit JD Logistics.

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