Coming soon to China: A major new express logistics network

Alibaba, China’s largest e-commerce company, is leading a consortium that intends to invest US$16.3 billion (yes, that’s right, $16.3 billion) over the next 5 to 8 years to build an advanced package delivery network. The group of companies includes express operator SF Express, courier companies Shentong Express, Zhontong Courier, Yuantong Express, and Shanghai Yunda express, as well as retailer Yintai Group and conglomerate Fosun International.

The project has been named the China Smart Logistics Network, and Alibaba Chairman Jack Ma Yun will become Chairman of a new company, Cainaio Network Technology, set up to manage it. In a statement, the consortium said Cainiao (which means “rookie”) will receive financial support from two strategic partnerships. One, led by China Life Insurance, will include Alibaba Group and Yintai Group; the other will be led by China Citic Bank.

What is most interesting about the project (other than the sheer size of the investment) is that unlike other Chinese e-commerce companies that are investing in proprietary logistics and delivery operations, the Alibaba-led consortium not only brings together leading industry players from different fields (SF Express, for example), but also plans to be open. Alibaba spokesman John Spelich was quoted in the South China Morning Post as saying: “We will build an information-sharing platform for all logistics players in China.”

Cainiao has also been widely quoted as saying the consortium plans to deploy an “open, transparent and shared data platform” to serve e-commerce businesses, logistics companies, warehouse companies, third-party logistics service providers and supply chain managers. Mr. Ma said the goal is to build an IT-driven network capable of delivering packages to the doorsteps of consumers anywhere in the country within 24 hours.

For those of you who aren’t familiar with the state of e-commerce in China, here’s something for scale: Alibaba’s own e-shopping website already generates over 20 million parcel deliveries per day.