Chinese e-commerce giant Alibaba Group has signed up leading express operators SF Express andShanghai YTO Express to the coalition it is leading to create a world-class nationwide next-day
domestic delivery and logistics network in China and is seeking further partners.Jack Ma, founder and CEO of Alibaba Group, announced plans two years ago to invest more thanUS$1.5 billion (€1.12 billion) to build a “non-proprietorial” nationwide network of warehouses in abid to “revolutionise China’s fragmented logistics and distribution sector”, as part of a US$15billion delivery-network investment. It invited delivery and logistics providers to join itscoalition and is now understood to have persuaded SF Express and Shanghai YTO Express (YTO) toparticipate in the project.
Sources close to Alibaba Group said that as a result of the issue being raised two years ago, anumber of partner companies have stepped forward and a coalition approach to solving the issue hasemerged, as had been proposed by Alibaba Group. Although the organisation was unable to confirm theidentity of members of the coalition, SF Express and Shanghai YTO Express are reported to be amongthem.
An Alibaba Group spokesperson told CEP-Research that the organisation “welcomes cooperation withall third party logistics companies, so this coalition is open to all those who are interested inworking towards the common goal”.
She added: “Alibaba Group is spearheading the project in cooperation with industry partners witha common goal of enhancing the existing logistics network, whether it be on the IT or physicaldelivery and warehousing levels; this is consistent with what we’ve said in the past: thatlogistics is a key industry bottleneck for e-commerce growth in China, and that everyone involvedin this sector needs to work together to drive rapid development.”
Headquartered in Shenzhen in southern China, SF Express was established in 1993 and providesdomestic and international express delivery services throughout mainland China, plus an expandinginternational network that now covers Taiwan, Korea, Singapore, Malaysia, Japan, and the UnitedStates. Products include inter-province same-day express, standard (mostly next-day) express andfour-day economy express, supported by a growing air express network of more than 400 air routesthat includes seven of its own-operated SF Airlines B757 and B737 freighters. It has around 5,000service branches, covering 31 provinces, municipalities and autonomous regions and nearly 300 largeand medium-sized cities and over 1,500 county-level cities or districts.
YTO claims to have as many as 20,000 delivery vehicles and access to an air network covering 76airports and 760 flights per day. It claims around 5,000 branches in more than 1,380 cities acrossChina, with package services also offered to Hong Kong, Macau, the Middle East and southeastAsia.
Jack Ma, who will step down as Alibaba Group CEO in May but remain chairman, observed thate-commerce sales were growing so quickly in China that logistics companies were “in danger of beingoverwhelmed and unable to deliver merchandise ordered online to Chinese homes and businesses in atimely way”. He said China suffered from a shortage of warehouse space and had no national orinternational delivery companies comparable to UPS or FedEx in the US.
“It’s clear that logistics is a crucial link in the e-commerce eco-system and in order forChinese entrepreneurs to reach their future growth goals this sector needs to develop rapidly,”said Ma. “It’s also clear that everyone involved in this sector needs to work together toaccomplish this.”
The Alibaba Group spokesperson confirmed to CEP-Research that the developing delivery andlogistics network was open to foreign-owned as well as Chinese companies. “This is an opencoalition and effort,” she said. “We welcome all parties provided that they aim to elevate theindustry’s service standards and better serve our shared customers.”
In addition to Alibaba Group investing $1.5 billion of its own funds in warehouses, Ma’s visionfor a “modern, 21st-century logistics network” involves attracting additional “seed capital”funding from private equity firms, venture capitalists and banks totalling $4.5 billion, whichwould in turn draw more than $15 billion to the logistics sector.
Areas initially targeted for warehouses are the Beijing/Tianjin area, the Yangtze River Deltaand the Pearl River Delta, with Alibaba Group planning to build warehouse space totalling around 3million square metres in those areas.
Other e-commerce companies have been trying to build up their logistics networks in China,having identified that delivery is a key competitive differentiator. B2C giant ‘360buy JingdongMall’ said it had secured $500 million from six strategic partners – including US retail giantWal-Mart, known for its ability to squeeze efficiencies out of its supply chain – to buildlogistics centres. Jingdong Mall said it was establishing “four big main logistics system platformsin Beijing, Shanghai, Guangzhou, and Chengdu, Jingdong in the hope of providing the most convenientlogistics distribution service for shoppers”.
Hong Kong-based Internet and media company Tom Group has announced it was launching a ChineseB2C site in partnership with China’s post office, which has 46,000 branch offices and 56,000delivery vehicles.
Ma insisted that what set the Alibaba logistics network apart from these others is that thecompany says it “will not build and operate a proprietary warehouse and distribution system”, butwould instead foster partnerships in an “open logistics platform”. The plan is for the group’s ‘Taobao’ business, which is an open marketplace of some 370 million small businesses and otherusers, to function as a hub for logistics information and a provider of a central supply chainmanagement system. The planned nationwide network of warehouses would be available for use bylogistics-industry partners, Taobao sellers and even independent B2C websites, the companysaid.
Alibaba Group is a family of internet-based businesses, including some of the world’s largestB2B, B2C and C2C online retail platforms. The combined gross merchandise volume (GMV) of its TaobaoMarketplace and Tmall.com platforms alone exceeded RMB1 trillion (€120 billion) in 2012.
