Alibaba Takes Controlling Stake In Cainiao And Will Invest $15 Billion In Global Logistics
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A monitor displays Alibaba Group Holding Ltd. signage on the floor of the New York Stock Exchange (NYSE) in New York, U.S. Photographer: Michael Nagle/Bloomberg
China-based Alibaba has acquired a controlling stake in logistics company Cainiao. The e-retailer giant has further announced an intention to invest 100 billion yuan ($15 billion) in its global logistical capabilities over the next five years.
Cainiao currently executes 57 million deliveries a day. Alibaba, which had owned 47% of Cainiao, has invested a further RMB5.3 billion (US$807 million) to increase its stake to 51%.
“By enhancing the logistics capabilities within the Alibaba ecosystem and extending our investment in this sector,” said Daniel Zhang, chief executive of Alibaba Group, “we are further enabling our New Retail strategy to bring online and offline retail into one seamless experience for shoppers.”
Cainiao was founded four years ago as a collaborative venture to improve the delivery of online purchases across China. The backers were primarily financial institutions as well as other logistics companies but was always considered an extension of Alibaba’s own logistics capabilities.
Now, Alibaba will claim a fourth representative on Cainiao’s seven-seat board and can more ably target strategic investments in the future.
A company goal is the creation of a capability to delivery anywhere in China within 24-hours and anywhere in the world within 72.
Alibaba aims, according to Zhang, to “build the most efficient logistics network in China and around the world.”
This demonstrates the time-worn value of physical facilities and capabilities in the physical world as a key differentiating factor for competing online. Amazon, for example, has made massive investments into technology as its warehouses are almost entirely free of human workers and its long-term plans cite networks of automated drones making same-day deliveries.
For Alibaba’s part, we will have to wait to learn of its 100 billion yuan bet on logistics. It is likely it will make similar technological investments to enhance the efficiencies of its own operations. The major business battle of the future may be dominated by the struggle between Amazon and Alibaba.
In Europe, we already have a notion of the nature of this competition. Alibaba is already looking to build a second datacentre to directly compete with Amazon for market share on cloud computing services.
Even within China, moves are being mirrored. Alibaba today announced a joint venture with New Huadu Supercenter, a grocer in Fujian province, to create a physical retail presence. This matches Amazon’s past acquisition of the healthfood chain Wholefoods.
The more we see of this unfolding struggle of internet giants, the more that is relates to the dominance of logistics channels and physical facilities. Unlike the corporate battles of the past, the outcome of this rivalry rests also on the competitors’ abilities to leverage technological expertise as well as marshalling vast distribution networks. And, unlike previous IT battles, the winner may turn out to be the best logistician.
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