Alibaba has signed an agreement with the Israel based container liner, ZIM. In a statement issued last week, the shipping company said that it had agreed a “broad strategic co-operation agreement for the direct purchase of sea freight, improving logistic services to Alibaba.com sellers. Under the agreement, ZIM provides sea freight and services through a direct interface with Alibaba.com’s logistics platform.”
The detail of this agreement is not clear. Alibaba has already had a number of agreements with shipping lines, such as Maersk and CMA CGM as well as ZIM, to forward-buy capacity on their ships.
However, it seems that this new deal is different. ZIM said that the objective is to “improve the visualisation process of Alibaba.com’s logistics platform” in order to create “stable, high-efficiency and visible global logistics delivery services for Alibaba.com sellers”. From such a statement it would appear that Alibaba is looking to build in a higher level of predictability into its logistics systems by going beyond just pre-purchasing shipping space. Rather, it seems to be moving towards a more integrated solution, which whilst not ownership, offers some of the benefits of vertical integration.
Container shipping is often problematic even for conventional retailers and wholesalers as the unpredictability of shipping services can disrupt stock availability. Integrating the location and scheduling of vessels into any wider logistics planning system would obviously be attractive for any major shipper. This might be what is being implemented between Alibaba and ZIM.
Alibaba is surpassed only by Amazon in terms of the size of its presence in e-retail, although Alibaba is overwhelmingly focussed on China, its business also covers business-to-business operations further down the supply chain. Like Amazon, it has been struggling to build a vertically integrated logistics capability, both for its own retail activities and for its merchants who sell through its site. However, so far Alibaba has not constructed the sort of capability that Amazon has created, for example, in airfreight.
The deal with ZIM illustrates how major e-commerce players are increasingly faced with the need to gain greater control and economies of scale over their physical logistics assets. This may not stop at collaboration agreements. It is possible that e-retailers may move to ownership of such assets in the medium-term.
Source: Transport Intelligence, October 27, 2020
Author: Thomas Cullen