Cainiao and SF come to blows over data control

Last Thursday, SF Express’ daily parcel volumes reportedly fell by one million units after a spat with Alibaba-affiliated Cainiao resulted in SF becoming temporarily de-listed as a service provider option within Cainiao’s logistics platform. This time around, the operational disruptions were short-lived. Following mediation by China’s Postal Bureau, the two companies resumed business as normal by 12:00 pm the following Saturday. Perhaps more importantly, the incident highlights some of the potential complications associated with big data ownership in asset-free, data-driven models like Cainiao’s platform.

Considering SF Express is currently considered one of the more reliable carriers for high-value goods, it’s likely that many of the one-million packages it ships each day for Alibaba customers move by air, on its growing 38-unit freighter fleet. At present, SF’s airfreight capacity and air network exceeds that of its closest competitor, YTO Express which operates six freighters. Both YTO and SF are adding aircraft as fast as the CAAC will allow, but Cainiao’s ability to swiftly divert such large volumes in an instant must weigh heavily on local couriers.

In its 1Q17 earnings release, Cainiao reported that it handled logistics for 81% of all orders placed by Chinese customers across Alibaba’s e-commerce shopping portals (Taobao, T-mall, etc.) during the month of March, a staggering y-o-y increase from 60% the year prior. Considering 42 million packages move through Cainiao’s network each day, choosing not to integrate with Cainao is almost a non-option for Chinese couriers and logistics providers. Linking to Cainiao’s platform can instantly connect massive volumes with available courier capacity, much like a freight forwarder.

Even though Cainiao does not directly operate any of the aircraft or delivery vans moving packages through its network, it collects massive amounts of data on every aspect of each shipment.  In return, Cainiao has helped identify areas where its partners can add capacity, optimize routes, and increase delivery efficiency. The transparency and visibility of parcels moving through the supply chain also boosts customer confidence by stemming counterfeiting, and the substitution of genuine goods with fake knock-offs.

The confrontation with SF Express appears not to have arisen from data sharing in general, but rather data from non-Cainiao shipments, perhaps originating from competing e-tailers like JD.com.  Specifically, SF claimed Cainaio demanded data from its last-mile drop-off lockers whereby it delivers parcels to centrally located lockers, rather than to residential units. How to truncate data, and where to draw the line when it comes to sharing will surely be a hot topic moving when it comes to e-commerce and express logistics.

For now, the issue seems to have been shelved, though the conversation will likely continue. In a press release Cainiao said, “[We take] a collaborative approach towards logistics. We are committed to developing an open and collaborative data platform to enhance the efficiency of the logistics industry. We would like to continue our dialogue with SF to resolve the issue.”