Alibaba, Cainiao invest in delivery firm to deepen retail collaboration

Alibaba Group and its logistic arm Cainiao Network will invest US$1.38 billion in express delivery firm ZTO for a 10 percent equity stake to deepen collaboration on the retail front, according to a stock exchange filing yesterday. 

The investment will further support both Cainiao and ZTO’s focus on building up first- and last-mile pickup and delivery capabilities, warehouse management, cross-border logistics and technology-driven smart solutions.

Daniel Zhang, CEO of Alibaba Group and Chairman of Cainiao Network, said: “ZTO has been an important partner for Alibaba Group and Cainiao Network in the development of the new digital economy, and this strategic investment will strengthen synergies to create new value and improved experiences for merchants and consumers.”

Alibaba has been promoting their new retail model that seeks to link online and offline commerce through deep consumer engagement based on insights drawn from advanced technology and data analytics. 

The new model, which is best demonstrated by the Hema Market — a fresh food marketplace that offers bricks-and-mortar shopping and dining as well as online ordering — would require investment in smart supply chains, retail technologies, advanced logistics and mobile payments, which is all aimed at delivering a better experience for both consumers and merchants.

“The logistics industry in China is highly competitive, with its own unique features and plenty of opportunity," Wan Lin, President of Cainiao Network said. "This investment will enable Cainiao and ZTO to deepen efforts to drive joint innovation and development to accelerate digitalization of the industry."

He added that they will also continue to work closely with industry partners to enhance logistics infrastructure and broaden their service offerings to meet the growing demands of new retail. 

Chinese courier and postal service providers handled more than 40 billion packages last year, climbing 28 percent from a year ago due to a boom in online shopping. The total number of packages delivered is expected to hit 49 billion this year. 

“The partnership with Alibaba and Cainiao will enable us to expand our selection of high quality service offerings both in China and internationally, and is fully aligned with our common interest in improving logistics efficiency and enhancing customer experience,” said Lai Messing, founder, chairman and chief executive officer of ZTO. 

ZTO reported a 10.9 percent increase to 557 million yuan (US$86.6 million) in net profit in the first quarter, and revenue was up 35.6 percent to 3.54 billion yuan over the same period. 

Cainiao has been working with courier delivery firms to serve online as well as offline merchants, and now has the capability to provide same-day and next-day delivery to nearly 1,500 districts and counties across China. 

Last year Alibaba Group said it would invest an additional 5.3 billion yuan to raise its stake in Cainiao Network from 47 percent to 51 percent.