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Alibaba deepens its logistics play – Business Insider

usscmc by usscmc
November 11, 2019
Alibaba deepens its logistics play – Business Insider
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Chinese e-commerce behemoth Alibaba invested 23.3 billion yuan ($3.3 billion) in logistics affiliate Cainiao in a move to strengthen its logistics operations, according to the South China Morning Post. Alibaba founded Cainiao in 2013 along with a consortium of partners and in 2017 spent $807 million to acquire majority control of it.

Alibaba Core Commerce Revenue


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Alibaba’s latest investment brings its stake from 51% to 63%. Cainiao plans to use Alibaba’s investment to develop new technologies and services in an effort to improve its existing smart logistics network, which already includes warehouse robotics, drones, high-speed scanners, and self-driving vehicles. 

Alibaba’s decision to take further control of Cainiao is part of a growing trend of e-commerce giants bringing logistics operations in-house to bolster their services. US rival Amazon is also in the midst of a push to internalize its logistics ecosystem: It plans to build a new robotics hub to further innovate its own warehouse robotics and has ordered 100,000 delivery vans to conduct its own last-mile delivery operations.

Moreover, Chinese rival JD.com is aggressively pursuing ways to grow and improve its own logistics network: In October 2019, the company participated in a closed-door logistics meeting with Google parent Alphabet and in May 2019 invested $55 million in Jiangsu Xinning Modern Logistics in an effort to build up its cargo matching system.

Legacy logistics providers, like DHL or UPS, stand to lose out on a growing source of revenue as e-commerce giants become less dependent on their services. Currently, online shopping accounts for nearly 15% of total retail sales globally and is expected to grow to 22% by 2023, according to eMarketer.

As e-commerce companies increasingly are able to process and ship the growing number of orders they receive, legacy delivery partners will find themselves with a smaller share of revenue. Moreover, as e-commerce companies grow their logistics operations they can evolve into potential rivals to legacy players. FedEx canceled air and ground delivery partnerships with Amazon earlier this year as the e-commerce giant became a larger logistics threat.

To counter the increasing independence of large e-commerce, legacy logistics providers need to partner with smaller platforms to ensure access to a steady flow of e-commerce orders. For example, last month UPS partnered with online shipping platform Shippo to allow Shippo customers to more easily access UPS services and boost the appeal of UPS’ services.  

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