Chinese e-commerce giant Alibaba today announced a major $3.3 billion investment to increase its stake in logistics subsidiary Cainiao and added new freighter flights to Russia to step up its ongoing international expansion.
The moves came ahead of the gigantic ‘11.11 Global Shopping Festival’ on Singles Day next Monday (November 11), which is expected to break new records and attract more international shoppers than ever. Alibaba predicts that up to 500 million buyers will buy goods from its Tmall and Taobao marketplaces as well as through AliExpress. Last year, 400 million shoppers bought more than one billion items that were delivered rapidly using Cainiao’s logistics network in China and abroad.
Alibaba Group said today that it had increased its stake in Cainiao Smart Logistics Network from 51% to 63% by spending $3.3 billion on newly issued Cainaio shares and acquiring shares from an unnamed existing shareholder. The latest investment in Cainiao would enable it to develop new technologies, logistics infrastructure and services, according to the group.
CEO Daniel Zhang emphasised the importance of logistics for Alibaba Group’s ecosystem in order to deliver top-tier customer service and support the New Retail strategy of combining online and offline shopping for consumers.
“Cainiao strives to enhance service and user experience for merchants and consumers through superior technology and digital solutions, both within China and around the world. We are committed to supporting its ongoing development, to realizing greater synergies throughout the entire Alibaba economy and accelerating digitization of the logistics industry,” he said.
Cainiao was originally a digital platform connecting Chinese express delivery companies and has developed over the last few years into a technology-based logistics network that operates warehouses, offers its own delivery services and increasingly coordinates Alibaba Group’s overall logistics activities. Alibaba Group took majority control in 2017 and last year announced plans to invest RMB 100 billion ($14 billion) to create a global logistics network to provide deliveries within 24 hours in China and within 72 hours worldwide.
The logistics subsidiary’s external revenues from providing services are growing fast, with a 48% rise to RMB4.75 billion (US$666 million) in the quarter ended September 30, 2019. Cainiao Post, its final-mile urban delivery network of collection points and lockers, has doubled volumes as has Cainiao Guoguo, a crowdsourced parcel pick-up and delivery service for consumers and small businesses.
Meanwhile, Cainiao has launched direct freighter flights from China to Russia to speed up deliveries of AliExpress orders. The logistics company has chartered seven freighters from Russian Post and Aviastar for daily flights from Hangzhou to Moscow, Yekaterinburg and Novosibirsk.
Denis Ilyin, Russian Post’s Deputy General Director for International Business, said the new Russian-Chinese joint service would reduce costs and speed up deliveries. Russian Post, which signed a cooperation agreement with Cainiao earlier this year, will handle customs and final-mile deliveries.
Dmitry Sergeyev, Director General of AliExpress in Russia, added: “The new product will allow us to establish direct delivery routes to the largest cities in the country, which account for more than half of all orders from AliExpress. The key task for us is to create all the conditions so that the buyers on our platforms receive orders within 10-14 days.”
Russia is seen as a top growth market for the Alibaba Group, which recently sealed a joint venture with the country’s biggest internet group Mail.ru and other investors to scale up AliExpress Russia. Russian retailers will take part in the 11.11. event for the first time this year through AliExpress.
