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Viewpoints

No shortage of logistics investors for Alibaba subsidiary

HANGZHOU: According to Alibaba Group CEO Daniel Zhang, logistics companies are ultimately high- tech companies as "the core of the logistics industry is the system of logistics information".

FedEx was founded on that principle so for logistics professionals, it's nothing new.

What might be is the Alibaba logistics subsidiary Cainiao, formed two years ago to provide an IT backbone to support a myriad of forwarders, truckers and last-mile couriers owned by Cainiao's co-investors and partners.

Today this cloud-and big-data-powered system provides real-time distribution center utilization rates, route planning information and order volume forecasts for 1,800 distribution centers and 97,000 delivery stations in more than 600 cities in 31 Chinese provinces.

CainiaoMajor shareholders in Cainiao include Alibaba (48 percent) retailer Yintai Group, Chinese conglomerate Fosun Group, S.F. Express Co., and four major Chinese courier companies: Shentong, Yuantong , Zhong Tong and Yunda.

They say they intend to spend US$16 billion in the next 5-8 years "to make it easy to deliver goods to anywhere" according to Cainiao president Judy Tong.

The Cainiao IT platform links a network of logistics providers, warehouses and distribution centers in order to improve service levels in China's logistics industry. The company says that for the 12 months ending June 2014, more than 6.1 billion packages were generated from transactions on its network – some 54 percent of all packages delivered in China according to the State Post Bureau of the PRC.

Handling over 30 million packages a day, in late April the company launched its largest supermarket distribution center in Eastern China to support Alibaba; on May 12 it began a three-hour delivery service in five major Chinese cities for healthcare orders from Tmall.com; two days later the Alibaba Group announced a strategic investment in YTO Express and on May 22 Cainiao launched its first supermarket distribution center in Southwest China for next-day delivery of Tmall.com products.

The Cainiao goal is to provide cross-border e-commerce facilitation for Alibaba and its logistics partners to 217 countries.

So news that XPO Logistics has raised US$1.26 billion in fresh equity and will offer US$2 billion in new debt, suggests investors think logistics is a sound long-term bet – wherever you are.

- Author Simon Keeble is the editor of Freightweek

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