Alibaba to invest heavily in logistics over the next five years

Alibaba’s “Taobao” platform recently forayed into the grocery business. Might such fulfillment centers be targeted for IT upgrades as part of the company’s plan to invest US $15 billion in logistics over the next five years

In what appears to be a shift away from an asset-light logistics model heavily reliant on third-party partners, China-based Alibaba Group Holding Limited announced plans to invest US $15.2 billion over the next five-years – with the ultimate aim of fulfilling domestic orders within 24 hours, and global orders within 72 hours. Its first major outlay will see the company assume a controlling stake in the integrative logistics platform, Cainiao. Subject to customary commercial agreements, Alibaba’s stake in Cainiao will grow by $807 million, boosting its stake from 47%, to 51% and increasing its representation on Cainiao’s board from three-seats, to four, out of seven, when the deal completes in October.

Cainiao operates a logistics platform that integrates services from a wide cross-section of logistics providers, in order to fulfill orders. Service providers of all types and sizes – everything from warehouse operators and air cargo carriers, to last-mile delivery couriers plug into Cainiao’s network, and are then linked with delivery and fulfillment requests from Alibaba’s online retail platforms. The partnership between Alibaba and Cainiao enables third-party merchants selling goods on Alibaba’s retail websites to sell and ship products without them passing through the hands of an Alibaba employee. While this strategy has certainly been cost-effective – Alibaba gained access to a comprehensive delivery network without significant investments in assets and delivery personnel of its own, some have noted that third-party reliance also limits Alibaba’s ability to push forward network-wide IT enhancements. Also, such cooperation only functions if all parties agree to collaborate (see Cainiao and SF come to blows over data control).

Although $15.2 billion seems like an extremely large sum, in some ways Alibaba may be playing catch-up. Beijing-based, the most formidable competitor to Alibaba’s retail platforms has taken a rather different approach to fulfillment, and has invested heavily in own-operated logistics systems from the beginning. At present, operates 256 warehouses, as well as 6,906 delivery stations and pickup stations across China. The Cainiao network offers access to a larger number, but they are owned and operated by third-parties.

A few of’s fulfillment centers are fully-automated, and either already, or will soon, support last-mile delivery via drone. Additionally, JD can choose to automate or implement a new technology without having to negotiate the terms with a third-party partner. In contrast to Alibaba’s retailing businesses, for which third-party merchants comprise the majority of its sales volumes, has a much larger proportion of direct orders. The benefits of more deeply integrated logistics operations are clear: a spokesperson for told Cargo Facts that the company is able to offer next-day delivery for 92% of its direct orders.

Moving forward, Alibaba appears to favor investment not only in technology, but also in delivery infrastructure of its own. In addition to boosting R& D logistics data technologies, the $15.2 billion earmarked for logistics investments will go to “development of smart warehousing, smart delivery and global logistics infrastructure.” The scope of what Alibaba means by “global logistics infrastructure” remains to be seen, but it has not ruled out further investment in air freight logistics.

To learn more about e-commerce logistics in China, join us at the Cargo Facts Symposium in Miami, 2 – 4 October, where executives from SF Express, and will be speaking. To register, or for more information, go to

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