Seeking to fulfill its mission of fulfilling orders in China within 24 hours and within 72 hours anywhere in the world, Alibaba is investing $15.2 billion over the next five years to expand its logistics network.
The investment will be used to increase R&D in logistics data technology, as well as for the development of smart warehousing, smart delivery and global logistics infrastructure.
The Chinese e-Commerce giant also has invested $807 million in its subsidiary Cainiao Logistics Network, boosting Alibaba’s stake in the company from 47% to 51% and giving it majority control. The investment would value Cainiao, a joint venture of top Chinese logistics firms, at approximately $20 billion. The conglomerate includes two million couriers and oversees roughly 57 million deliveries a day.
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Cainiao is designed to help online merchants choose from among 15 delivery firms by providing information on cost and delivery time. Approximately 70% of Cainiao shipments are routed by algorithms to ensure the network’s couriers get packages to customers as efficiently as possible, according to a report from The Wall Street Journal.
As part of the deal, Alibaba will gain one additional new seat on the Cainiao Board of Directors, increasing its board representation to four out of seven seats.
Daniel Zhang, CEO of Alibaba Group noted in a statement that the investment further enables the company to focus on its omnichannel “New Retail” strategy, which is designed to integrate online, offline, logistics and data across a single value chain.
Southeast Asia: The Next Major Stop?
Alibaba already has made significant investments in expanding its e-Commerce and logistics network in the Southeast Asia region, investing $2 billion in online retailer Lazada and leading a $1.1 billion investment in Tokopedia, an e-Commerce marketplace based in Indonesia. Lazada has a presence in six countries that could provide a big benefit to Alibaba in the future, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Southeast Asia will provide a major boost to the global economy over the next decade, making the region an important step in Alibaba’s expansion plans. Annual e-Commerce spend in the region is expected to jump from $5.5 billion in 2015 to $88 billion in 2025, according to a 2016 report co-authored by Google and Temasek.
The investment is expected to be completed in October 2017, subject to satisfaction of customary closing conditions.
