Alibaba Increases Its Stake In Logistics Firm Cainiao

Chinese online retail giant Alibaba will be investing an extra $807 million in logistics company Cainiao. This has raised Alibaba’s stake in the logistics firm to a controlling one and this will result in the e-commerce giant having to consolidate Cainiao’s losses amounting to $2 billion in its books. Currently Cainiao’s valuation is approximately $20 billion.

Previously Alibaba’s stake in Cainiao was 47% but has now been increased to 51%. On a daily basis the logistics service delivers parcels numbering 55 million via a fleet of bikes, trucks and ships. Additionally Alibaba has made a pledge to invest $15 billion in the course of the next five years with a view to developing a worldwide logistics network as the online retail giant prepares for a major expansion overseas. Specifically the money will be used in improving delivery and warehousing as well as developing data technology.

Delivery and warehousing

“Our commitment to Cainiao and additional investment in logistics demonstrate Alibaba’s commitment to building the most-efficient logistic network in China and around the world,” said the chief executive officer of Alibaba, Daniel Zhang, in a statement.

Alibaba’s investment in Cainiao is also an indication that the e-commerce giant intends to increase the control it has over the delivery and warehousing market in China. In the recent past the market has become highly competitive as companies try to use the logistics data obtained from online shoppers to their advantage. At times the competition among logistics companies has resulted in tensions between online retailers and the couriers.

Fierce rivalry

Three months SF Holding, a major logistics firm, severed the ties it had with Cainiao, which offers logistics support to Taobao, an Alibaba-owned and operated e-commerce platform. At the time SF Holding claimed that the online retail giant had asked for data which was unrelated to their existing partnership contract. The claims were denied by Alibaba.

Despite some of them facing challenges with regards to recent public listings, the logistics firms in China have attracted the attention of equity investors who have poured billions of dollars into them.

Cainiao was co-founded by Alibaba four years ago and the partners in the logistics firm included Intime Group, a department store owner, conglomerate Fosun Group as well as a couple of logistics firms. Alibaba has previously indicated that it wants orders in the mainland delivered within a period of 24 hours while global orders should be delivered within a period of 72 hours.