Alibaba Group leads $1.38 B investment in express delivery company ZTO ExpressSpandan Sharma
The Alibaba Group has one of the biggest e-commerce platforms in the world, achieving a total transaction volume of 3 trillion yuan (US$466.8 billion) in 2016. Fuelling this mammoth enterprise is one of the largest logistics networks anywhere, powering hundreds of thousands of deliveries every day across China and the rest of the world. Alibaba announced plans in March to invest 100 billion yuan (nearly US$15.6 billion) over five years to build a global logistics network, and to this end, paid over $800 million in September 2017 to get majority ownership in the firm’s logistics arm Cainiao Network.
Now, Alibaba is taking its logistics network to new heights with a massive investment in fast-growing Chinese express delivery company ZTO Express (Cayman) Inc.
In a press release published yesterday, May 29, Alibaba revealed that a group of investors led by Alibaba and Cainiao are investing US$1.38 billion in ZTO in exchange for a 10 percent equity stake in the company. The press release did not reveal who the other investors are but said the deal is expected to close by early June. According to the press release, after the investment, Cainiao and ZTO will work together closely to push the growth of Alibaba’s New Retail concept that merges the rapidness and accessibility of e-commerce with the comfort and ease of traditional brick-and-mortar stores in a new form of hybrid retail outlets.
Daniel Zhang, CEO of Alibaba Group and Chairman of Cainiao Network, said, “ZTO has been an important partner to Alibaba Group and Cainiao Network in the development of the new digital economy. The continuing expansion of New Retail is catalyzing new opportunities and demands in logistics. This strategic investment will strengthen synergies across our mutual businesses to create new value and improved experience for merchants and consumers.” Lin Wan, President, Cainiao Network, added, “The logistics industry in China is highly competitive with its own unique features and presents plenty of new opportunities ahead. This investment will enable Cainiao and ZTO to supercharge joint innovation and development to accelerate digitalization of the industry. We will continue to work closely with industry leaders, including ZTO, to enhance our logistics infrastructure and broaden our service offerings to meet the growing demand from New Retail.”
Cainiao was started in 2013 by Alibaba and eight other backers – including ZTO – to build an organised logistics network in China backed by technology and innovations like smart sorting and e-shipping labels. The Network has expanded in the last five years to provide same-day and next-day delivery in nearly 1,500 districts and counties in China, and now operates Cainiao Post, a network of last-mile stations covering communities in top 100 cities and around 1,800 university campuses across the country.
For its part, ZTO has been a longstanding partner with Alibaba, with about three-quarters of the firm’s parcel volume coming from Alibaba alone at one point. However, the company is facing increasing competition in a highly fragmented market with multiple players, and the Alibaba investment will help the firm build a stronger base for future services. Meisong Lai, Founder, Chairman, and CEO of ZTO, said, “Built as an open platform based on a shared-success philosophy, ZTO has become one of the leaders in the express delivery industry in China. Our continued collaboration with all industry constituents, and particularly with Alibaba and Cainiao through this strategic partnership, will amplify our competitive advantage and support our mission to become a world-class comprehensive logistics service provider.”
Alibaba and rival JD.com have poured huge sums of money into building robust logistics and delivery networks for their e-commerce offerings in China. As the e-commerce boom fuels online shopping and consumers increasingly demand faster and more reliable shipping, Alibaba will definitely be counting on the expertise brought by ZTO to ensure its offerings stay competitive.