Alibaba, the Chinese e-commerce giant, is strengthening its logistics offer as it aims to streamline its entire process in a fundamentally different manner to JD.com and Amazon.
Alibaba will take a 14% holding in STO Express Co Ltd through a $693 million investment, in a further move towards its aim of 24-hour nationwide delivery.
The deal is yet another significant investment by the e-commerce giant in China’s courier sector, underlining efforts by Alibaba to streamline its entire processing and delivery process, making it faster and more cost-effective.
In a statement Alibaba said the investment was in "one of the top five express delivery companies in China.
"We will deepen our existing collaboration with STO in technology, last-mile delivery across China and New Retail logistics," it said.
"This investment is a step forward in our pursuit of the goal of 24-hour-delivery anywhere in China and 72 hours globally," Alibaba added.
The courier company said, “STO will further explore co-operations in areas of logistic technology, parcel delivery end and new retail logistics after the deal is closed.”
Alibaba doesn’t own most of the companies that make up its logistics components, such as warehouses and delivery companies; instead it focuses on the technology that allows all these elements to operate as a joined-up network.
The company’s logistics platform Cainiao links courier riders, delivery details and warehouses and is responsible for Alibaba’s huge logistics operation, while Alipay underpins payments through Alibaba’s retail platforms. And, as the FT reports, the low cost of courier delivery services in China has helped drive the booming e-commerce sector.
This latest investment in the courier industry comes as the demand for parcel delivery in China rises, reports the South China Morning Post; in 2018, over 50 billion packages were delivered, a new record.
Alibaba has previously invested in the YTO Express Group, ZTO, BEST and Suning Logistics. Shanghai-based STO is the smallest of China’s big five courier companies in terms of market capitalisation – it’s capitalised at 31.3 billion yuan, compared with 153.1 billion yuan for SF Holding, and 106.5 billion yuan for US-listed ZTO Express Cayman, the SCMP reports.
Logistics now accounts for some 15% of China’s gross domestic product, and Alibaba says it hopes its streamlining efforts will bring that GDP figure down to 5-6%, which reflects more developed markets.
Sourced from the Financial Times, South China Morning Post; additional content by WARC staff