Chinese e-commerce company, Alibaba Group Holdings Ltd., is expanding its logistics network following investment in Best Logistics Technologies Ltd. Alibaba’s subsidiary, Cainiao Smart Logistics Network Ltd., was one of the main investors in Wednesday’s USD 760 million fundraising round for the logistics company, with other investors including Goldman Sachs Group Inc. and China Development Bank International.
As China’s biggest e-commerce entity, China’s logistics sector is still in its early stages and simply does not have the same level of support as seen in other regions such as the U.S. and Europe. Alibaba plan to improve things however, and have committed to investing up to USD 16 billion in the Chinese logistics sector over the next five to eight years.
Alibaba’s logistics investments are as much for their own benefit as they are for the country; Alibaba’s Single’s Day sale in November last year generated USD 14.3 billion for the company. With an improved national logistics network the company could expect to make even more money, and it seems Alibaba have identified Best Logistics Technologies as one of the means to achieve this. The logistics company, founded by former Google China co-president Johnny Chou, has approximately 30,000 employees working at 400 distribution centers across China, plus three warehouses in the U.S. and a warehouse in Germany.
Similarly, Alibaba invested USD 4.6 billion in Suning Commerce Group last year as a means to increase their logistics reach in China. Suning’s nationwide logistics network covers 90% of China’s counties. In addition to this, Cainiao president Judy Tong revealed in May this year the company’s intentions to quintuple their current warehouse space by this time next year. This will increase Cainiao’s warehouse space to almost 54 square million feet, which will be split into two tiers of warehouse space. The top tier will focus on up to ten cities while the lower tier will use partners and affiliates to deliver to rural areas.
It seems that as China’s logistics sector continues to grow, Alibaba want to ensure they are leading the pack and own in part the logistics networks required to support their massive e-commerce sales.