Alibaba plans logistics network


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by The RightSite,

E-commerce giant aims to fill demand for deliveries as online shopping grows in popularity

Alibaba Group Holding Ltd, China’s largest e-commerce company, plans to join hands with partners to build a logistics network across China that can support 10 trillion yuan ($1.6 trillion) worth of transactions a year within the next decade.

It will take the lead in a 100 billion yuan investment in the network by teaming up with industry players, banks and the biggest express delivery companies, including Chinese retailer Yintai Group and private conglomerate Fosun Group, Alibaba said in an e-mail sent to the media.

China’s logistics industry has grown as online shopping has become increasingly popular. However, it has also been criticized for its inability to satisfy the great demand of e-commerce delivery.

Alibaba aims to make deliveries between any two places in China within 24 hours once the network – China Smart Logistic Network – is finished.

“It’s like building a road so that cars can run on it,” said Yang Lei, public relations director of Alibaba.

He added that Alibaba will not do the deliveries itself, just like it doesn’t sell things itself but instead builds the infrastructure for others to sell.

Alibaba and its partners will set up warehouses across China and build a data system that tracks trade and delivery information of suppliers, sellers and buyers to improve the efficiency and quality of deliveries, Yang said.

A new company will be set up, and Jack Ma, Alibaba’s chairman, will act as the chairman, while Shen Guojun, chairman of Yintai Group, will be the chief executive officer, he added.

The e-mail didn’t elaborate on how Alibaba and partners would make money from it, but said that participants in the project will “invest in the coming five to eights years without thinking of returns”.

In 2011, the company said it planned to cooperate with partners to invest between 20 and 30 billion yuan as the initial investment for the long-term logistics project.

Xu Yong, chief consultant with the express and logistics website, said that Alibaba’s promise to deliver packages in 24 hours will be hard to fulfill.

“In first-tier cities, some unexpected factors, such as a traffic jam, could break your promise. While in China’s central and western areas, because of their poor infrastructure, it is very likely that people cannot receive packages in one day,” Xu said.

In addition, a single logistics network may naturally block Alibaba’s e-commerce rivals, such as Jingdong Mall, from joining, Xu added.

“Express companies outside the alliance may also suffer because they cannot share the resources,” he said.

Jingdong Mall, the second-biggest business-to-customer website in China, has established six logistics centers, covering more than 300 cities across China. The company is building up a warehouse and logistics system in major cities like Beijing, Shanghai and Guangzhou.

Last year, China’s express delivery industry had 106 billion yuan in revenue, a year-on-year increase of 40 percent, according to the State Post Bureau.

The number of packages delivered last year increased 55 percent from a year earlier, and Ma Junsheng, director-general of the State Post Bureau, expected the figure to increase by 40 percent this year, hitting 8 billion.

A report from the Boston Consulting Group in 2012 suggested that China is likely to surpass the United States to become the world’s biggest online retail market in 2015, a year in which the country’s online retail sales are expected to be worth more than $360 billion.

Source:China Daily

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