Alibaba leads to build US$16b logistics net

Alibaba Group, China's largest e-commerce company, is leading a group of investors with plans to build a 100 billion yuan (US$16.1 billion) "smart" logistics system to connect existing networks and provide faster, more efficient delivery of goods ordered online.

The new company, called Cainiao Network Technology Co, was unveiled in Shenzhen yesterday.

"Cainiao" is a popular term on the Internet in Chinese, referring to a rookie lacking experience.

"The new company is named Cainiao because we're a group of newcomers in the logistics industry," said Shen Guojun, chairman of Yintai Holdings Co, one of the investors in the project. "We will learn and grow together with start-up firms."

Total investment in the project could reach 300 billion yuan. The project is expected to link hundreds of domestic cities.

"We'll dedicate at least 10 years to developing the new company and hope to reduce the logistics cost for privately owned companies and small vendors," said Jack Ma, chairman of Alibaba, who will also chair the new company.

Ma and others in e-commerce have identified improved logistics services as a key element for growth in the industry.

The new venture will become a platform connecting existing logistics network with Internet infrastructure so that data about packages and delivery information can be easily accessed and managed, said Tong Wenhong, vice president of Alibaba.

The initial focus will be on cities where logistics services are less developed and online orders may take days to arrive.

Construction of warehouses and logistics centers is starting in a dozen cities.

The plan, initially announced in January, is a part of Alibaba's broader strategy of providing so-called "Internet infrastructure" to start-up companies and small online vendors.

Alibaba aims to provide a full industry chain of services for online vendors so that they can sell merchandise, advertise, receive online payments and manage delivery services on the platform.

Other shareholders in the project include the Fosun Group, China's largest privately owned conglomerate, major courier firms and financial institutions such as China Life Insurance Group and Citic Group.

Domestic e-commerce companies have been investing heavily in logistics because online shoppers demand speedy deliveries with no hiccups.

Beijing-based JD.com began construction on several warehouses in the Jiading District of Shanghai in 2009. The company's delivery network covers more than 360 domestic cities.

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