Alibaba invests heavily through Best and Cainiao

Chinese e-commerce giant Alibaba is continuing to develop its logistics capabilities across China and the rest of the world.

A key part of this has been the capital raising by Best Logistics, a warehousing and forwarding company with a presence across China and some facilities in the US and Europe.

Floated on the New York Stock Exchange last week, Best raised US$450m. It’s CEO, Johnny Chou, commented to Reuters that this capital is to be used to both invest in new warehousing technology but also to create a network of drop-off and pick-up locations across China.

Best Logistics and a related warehousing technology business has previously received heavy investment from Alibaba and it appears to be an important part of Alibaba’s overall logistics and ‘last-mile’ strategy.

In addition, Alibaba announced on September 26 that it will invest the equivalent of US$15bn over a five-year period in ‘Cainiao Smart Logistics Network’. Alibaba already owns 47% of the company and the new capital injection will push this to over 51%. Cainiao investors include Chinese state institutions and western private equity companies.

Alibaba’s CEO, Daniel Zhang, commented that the target for this investment would be “research and development in logistics data technology, to develop smart warehousing, smart delivery and global logistics infrastructure” in order to develop the most efficient global logistics network.

Alibaba is expanding the footprint of its e-commerce operations beyond China and into South East Asia. The company states that it has a goal of being able to reach any consumer in the world in 72 hours, however it is still a long way from this. Indeed, even serving customers in China is difficult.

One of Alibaba’s challenges is to expand its physical footprint across Asia, expand into regions where it has little or no presence such as Europe and North America whilst at the same time developing cutting-edge logistics technology.

The size of the Chinese logistics sector, especially its e-commerce related networks, is huge and growing rapidly. The recent flotation of ZTO Express in New York was just another aspect of a business that is emerging as part of a global web of high-performance systems focussed on retail and which is redefining much of the logistics sector at a global level.

Source: Transport Intelligence, September 26, 2017

Author: Thomas Cullen


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