Alibaba's Cainiao invests 1b yuan in delivery upgrade

Zhang Yong, Alibaba's chief executive officer and the chairman of Cainiao. [Photo/VCG]

Cainiao, Alibaba Group Holding Ltd's logistics offshoot, is investing 1 billion yuan ($153.6 million) in an upgraded type of service, which it claims will offer China's growing army of online shoppers better, faster deliveries.

Zhejiang Cainiao Supply Chain Management Co, to give its full name, is creating the Cainiao Alliance, a new e-commerce logistics organization, which officials said will be dedicated to offering higher-quality delivery services.

Couriers signing up to the alliance will be offered access to Cainiao's full infrastructure resources, its supply chain and big-data facilities, and have access to its customer service team, which the operator claims will provide a higher level of service.

"Logistics is key to any new business and the new economy," said Zhang Yong, Alibaba's chief executive officer and the chairman of Cainiao.

"Cainiao wants to leverage its technology and big data to empower its courier partners to provide quality and reliable delivery services."

According to the Hangzhou-based Cainiao, it has already attracted some of the country's biggest courier firms to join the alliance, including Zhongtong Express and Shentong Express.

The alliance is expected to immediately roll out the upgraded package of services, including same-day and next-day deliveries, on Alibaba's business-to-customer site Tmall. Cainiao said the goal is for the alliance to serve 10 million enterprises and have the annual capacity to deliver 100 billion parcels in the next five to eight years.

Founded by Alibaba and a consortium of logistics companies, Cainiao is different in that rather than expanding its own network it operates a proprietary logistics information platform, that links a network of providers, warehouses and distribution centers, that offers better efficiency and cost savings.

It recently closed its first round of external fundraising, a week before New York-listed Alibaba said the value of gross merchandise on its online marketplaces in the current fiscal year exceeded 3 trillion yuan.

Tong Wenhong, Cainiao's chief executive officer, said China's e-commerce industry's development over the next decade will largely depend on the progress of the logistics industry.

She said 20.6 billion packages were generated by online shopping last year, up from 860 million in 2005.

"But our recent survey found that 56 percent of online shoppers said deliveries were not on time, and around a quarter complained the deliverymen were impolite," she said.