Break Out: How cross-border e-commerce could evolve as Cainiao goes global

Penetrating the European market

One of the planned hubs that is farthest away from China is already in rapid development – Liège was chosen as one of Cainiao’s two European hubs for its increasing prominence as a cargo community. On Dec. 5, 2018, Alibaba signed a memorandum of understanding (MoU) with the Belgian government and LGG, to purchase two plots of land in the airport: one which will become a first-line facility that is directly connected to the air site, and a second that will serve as a sorting center, “which will largely be used for airfreight,” Verhasselt from LGG said.

While Cainiao is still working on building infrastructure, Verhasselt said that Alibaba packages are already in Liège Airport and being distributed “all over Europe.”

The e-commerce giant has been employing a similar airfreight strategy in Europe as it has done in with local carriers in China, utilizing capacity on trans-European operating carriers, such as ASL Airlines, Silkway Airways and AirBridgeCargo (ABC), in order to get its products in the hands of European consumers while it chips away at its two construction projects at the hub.

Verhasselt said Cainiao expects the first phase of the project to be complete near the end of 2020, in time for Singles Day (11.11) that year. But even with operations just gearing up at the airport, he said there has already been a tangible effect on the cargo community in Liege.

“I think everybody is benefitting from it,” Verhasselt said. “It’s really boosting all the activities, and we also see that many partners are positioning themselves. We see an increased interest from different service providers of all kinds – customs agents, we see activity from a number of postal companies that all of the sudden open offices in Liège and put people here – things that we didn’t see before.”

ABC, one of the involved carriers operating at LGG, serves a route connecting the Belgian hub to the second planned European nerve center: Moscow. Its parent company, the Volga Dnepr Group, inked an MoU with Cainiao last year, in which it is helping Alibaba develop a route network connecting Asia with Europe via Russia, including ground-handling and road-feeder services, in addition to the airfreight capacity it provides for Cainiao in Moscow with its 747 freighter fleet.

“Cainiao is a strong player at the local market (China) and has a chance to scale [the] logistics model from local to global,” Vitaliy Andreev, global director of e-commerce at ABC said. He already sees changes in the Russian e-commerce market, with logistics companies improving services to compensate for international marketplaces and e-tailers, citing that AliExpress, one of Alibaba’s e-commerce platforms, represented around 20 percent of total e-commerce volumes in Russia last year.

Andreev agreed that a rising global demand for e-commerce – which he said is growing at 20 percent per year, on average, which matches data from Statista – could serve to re-stimulate the currently stagnated demand for airfreight. He agrees that the industry will need to bump up infrastructure in order “to meet e-commerce customers’ requirements regarding cutting of transit time from aircraft till track for last-mile delivery.”