Alibaba’s IPO and what it means to the logistics industry

At long last Alibaba has filed its IPO with the US Security and Exchange Commission. While the press is all abuzz over what it will mean to consumers and investors, perhaps a more interesting question is what does it mean to the logistics industry?

Its filing depicts a large logistics network spanning across China. Alibaba owns 48% of Zhejiang Cainiao Supply Chain Management Co., or China Smart Logistics. Equity partners in this affiliate include five major express delivery companies in China as well as firms specializing in real estate development.

According to the filing, as of March 2014, its 14 strategic delivery partners employed over 950,000 delivery personnel in more than 600 cities and 31 provinces. Collectively, these delivery partners operated more than 1,700 distribution centers and more than 100,000 delivery stations. Alibaba believes that orders generated from its marketplaces represent a significant portion of its logistics partners’ total delivery volumes in 2013.

The volumes are staggering. In 2013, 5.0bn packages were delivered by Alibaba’s logistics partners. In comparison, UPS delivered 4.3bn packages according to the filing. Based on China’s State Post Bureau, a total of 9.2bn package were delivered in 2013. Thus, Alibaba was responsible for 54% of the total package volume in China. Of the total packages delivered on behalf of Alibaba, 1.3bn were delivered within 48 hours.

Its information system as depicted in the filing is interesting. A proprietary system operated by China Smart Logistics, links logistics providers with Alibaba. It allows all participants to share information on order specifics, delivery status and user feedback. Also, the system can interface with other systems including transportation management systems, CRM, ERP and warehouse management systems. Among its capabilities include real time tracking, delivery time forecasting, and the ability for providers to compare their performance against peers.

While over 80% of its total revenue is derived from China, 9% is via international sales. Although no mention was made in regards to investing in overseas expansion, it would not be surprising to see this occur. Buyers on are located around the world with the US, India and the UK among the leading countries. Alibaba has already made investments in the US market and with this IPO could possibly expand further in the US and other locations.

For logistics providers wanting to participate in the Chinese e-commerce market, it appears one would need to play by Alibaba’s rules or be content with garnering some of the remaining 46% of China’s parcel volume.