Chinese e-commerce giant Alibaba Group plans to invest S$312.5 million (about $250 million) in Singapore’s publicly-traded mail carrier as part of a “strategic cooperation” aimed at improving the efficiency of cross-border e-commerce.
An agreement with Singapore Post Ltd. (SingPost) calls for Alibaba Group’s wholly owned subsidiary, Alibaba Investment Ltd., to take a 10.35 percent stake in SingPost by purchasing 30 million of the company’s existing ordinary shares and 190.096 million new ordinary shares. Listed on the Singapore stock exchange, SingPost is Singapore’s designated postal carrier.
While a tie-up between an e-commerce company and a national post office is unusual, Hangzhou, China-based Alibaba Group has been pushing for growth in its websites that allow consumers to purchase goods directly from online merchants in other countries. Many of the obstacles to this “cross-border” form of online shopping involve physically moving small packages efficiently worldwide, difficulties such as relatively high shipping costs, lengthy delivery times and complications in getting orders through customs agencies.
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In addition to being Singapore’s domestic mail carrier, SingPost offers e-commerce logistics services for parcel deliveries in Asia and globally. These solutions include freight transport, warehouse fulfillment, and merchandise returns. SingPost’s e-commerce and related businesses currently account for about 26% of its total revenue, according to the company.
The Alibaba deal calls for the two companies to negotiate a joint venture in international e-commerce logistics, according to a press release issued by SingPost and Alibaba. The JV will also explore “e-commerce opportunities in Southeast Asia and beyond by providing … greater access to SingPost’s international logistics capabilities, infrastructure and delivery networks, as well as end-to-end solutions to Alibaba Group customers and merchants,” the release stated.
Calling the deal a “significant milestone” in his company’s regional expansion plans, SingPost Chairman Lim Ho Kee said cooperation with Alibaba, one of the world’s largest e-commerce companies, provided strategic advantages that will allow the carrier to significantly scale up its e-commerce logistics business to meet growing regional demand.
The Asia-Pacific region is becoming the largest regional e-commerce market in the world, with online transactions expected to hit more than $1 trillion by 2020, according to eMarketer.
Alibaba Group Chief Operating Officer Daniel Zhang said in a statement the deal would allow Alibaba to “leverage SingPost’s strong delivery networks and end-to-end e-commerce logistics solutions to facilitate international e-commerce.”
This week, Alibaba also announced it had struck a deal with Australia Post to help more Western merchants sell to Chinese consumers through Alibaba’s Tmall.com online shopping website. In a separate agreement, Australia Post said it would sell and promote a service offered by Alibaba-affiliated Alipay, China’s largest e-payments provider, in 4,400 retail stores down under. Alipay offers debit-like cards to international shoppers that make it easier to purchase directly from Chinese shopping websites.
Like postal carriers around the world, SingPost in recent years has faced declining revenues as consumers and businesses adopted digital communications. The growth of e-commerce promises post offices new sources of income if they can transform themselves into efficient package-delivery companies.
SingPost Group Chief Executive Officer Wolfgang Baier said Alibaba’s investment would provide the carrier with financial flexibility and enable the company “to grow its regional e-commerce logistics much faster and strengthen it as a regional revenue stream, even as our core domestic business continues to be under tremendous pressure from rapidly declining domestic traditional mail volumes.”
Among other logistics solutions, SingPost is working on improvements to warehousing, last-mile delivery, customs clearance, parcel collection, and order consolidation and fulfillment. SingPost is also working on the regional rollout of what it calls “POPStations,” a network of outlets located in post offices and retail establishments where online shoppers can pick up packages they have ordered online.