Alibaba to Build a Massive Delivery Network

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Chinese giant e-commerce company Alibaba Group has unveiled a new plan to invest more than $15 billion in an expansive global logistics network within a period five years. The company will also spend over $800 million to expand its shipping network, underpinning an aggressive overseas expansion.

To start off its expansion program, Alibaba’s top management agreed to increase the number of shares it owns in Cainiao Smart Logistics Network Ltd from 45 to 51 percent, making it the largest shareholder. In the deal, the company plans to incorporate Ciano’s financial records into its own books and add an additional spot on Cainiao’s board of governors, securing four out of the seven seats available. This new development will cost Alibaba over $1 billion and will increase the value of Cainiao to $20 billion.

Cainiao, a little-known but rapidly expanding company, will now sit at the heart of Alibaba’s large network both in China and abroad. The company manages a group of investors who have interests in shipping. It oversees deliveries carried out by more than 2 million customers across 500 cities. The company’s operations have made it easier for Alibaba to coordinate its delivery services across the globe.

According to Alibaba’s CEO Daniel Zhang, the company is committed to expand Cainiao and launch additional investments in logistics to increase efficiency in China and all over the world. The announcement comes as Alibaba looks to improve its e-commerce platform and logistics network internationally, including retail channels in Thailand, Africa, Philippines and Indonesia. The move was inspired by the success of the Lazada Group, one of the Alibaba’s associates in Southeast Asia.

Alibaba’s big investment in Cainiao signals its intention to increase its control over delivery market and domestic warehousing. These two areas of logistics have become very competitive over the recent years as companies seek to capitalize on logistics data assets. Recently, SF Holding Co terminated their contract with Cainiao, citing Alibaba’s violation of the terms of agreement. Alibaba denied such claims.

Alibaba will use the $15 billion investment to improve its data technology and develop its warehousing and delivery units. The new development is expected to take between four and five years and will see a huge expansion of the company’s logistics network in China and all over the world. The first phase of development will begin in the next three months and will feature an extensive overhaul of data management platforms followed by restructuring and reconstruction.

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