PRC Companies to Invest $16 Billion in Logistics Network

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PRC Companies to Invest $16 Billion in Logistics Network

Chinese e-commerce and logistics companies have formed a consortium to build an advanced package delivery network in China as the country’s online shopping boom continues to gather momentum.

Piggybacking on a previously announced plan to create a nationwide logistics platform spearheaded by Alibaba Group, China’s largest e-commerce company, theconsortium said it plans to invest up to RMB 100 billion ($16.3 billion) over the next 5-8 years to developwhat it is calling theChina Smart Logistics Network.

A new company, Cainiao Network Technology Co., Ltd., has been formed to manage the system. Major shareholders include Alibaba Group, retailer Yintai Group, Chinese conglomerate Fosun Group, S.F. Express Co., and four major Chinese courier companies: Shentong, Yuantong , Zhong Tong and Yunda. Alibaba Group Executive Chairman Jack Ma was named Cainiao’s chairman. Yintai Group CEO Shen Guojun will serve as CEO.

According to a press release, Cainiao will receive financial support from two strategic partnerships: one between China Life Insurance, Alibaba Group and Yintai Group, and the other involving China Citic Bank and Cainiao. Details of financing plans were not disclosed.

The announcement of the consortium is the latest step in an effort begun by Alibaba Group in early 2011 to rally logistics companies, couriers and e-commerce companies to work collectively to tackle the problems plaguing China’s fragmented and underdeveloped nationwide parcel delivery infrastructure. Bottlenecks such as a lack of warehouse space and obsolete technology threaten to stunt the booming growth of online shopping in China, which increased nearly 65% last year to more than RMB $1.3 trillion.

Taobao, Alibaba Group’sgiant e-shopping website, generatessome 20 million parcel deliveries every day, accounting for 70 percent of China’s total.

While some online shopping websites are building proprietary delivery networks, Alibaba officials have stressed the problem is too big for one company to handle independently. Instead, Alibaba has been lobbying for the development of a technologically advanced deliverysystem that can be built and shared by many partners. Alibaba’s Ma has said the goal is to build an IT-driven network capable of delivering packages to the doorsteps of consumers anywhere inthe countrywithin 24 hours.

Cainiao officials saidthey intend to use Internet technologies such as cloud computing to support daily delivery of up to RMB 30 billion worth of online purchases, or RMB 10 trillion annuall- roughly 10 times current volumes. The consortium plans to deploy an “open, transparent and shared data platform” to serve e-commerce businesses, logistics companies, warehouse companies, third-party logistics service providers and supply chain managers. Upgrading China’s logistics industry is expected to generate millions of new jobs.

Cainaio means “rookie” in Chinese. “We named the company Cainiao because we want to remind ourselves that the Internet is everywhere and we have to maintain a rookie’s mindset to keep innovating and learning,” said Yintai Group’s Shen in a prepared statement. “What we are going to do is something brand new,” he said.

CainiaoChinese E-CommerceDeliveryLogistics

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