<img height="1" width="1" style="display:none;" alt="" src="https://dc.ads.linkedin.com/collect/?pid=170946&amp;fmt=gif">




Welcome to The CoLoadX Blog




Alibaba: Innovator or Fast Follower?

Jun 8, 2018, 12:45:07 PM / by Fauad Shariff

In the last few months, Alibaba and its logistics subsidiary, Cainiao, have been especially active in the freight forwarding world. This shouldn’t be a surprise: we’ve noted before how e-commerce companies see logistics as the last barrier to complete retail dominance. Alibaba knows it needs to conquer logistics to grow its retail business.

Alibaba’s moves aren’t attention-worthy because they’re innovative, but rather because they point to an emerging global strategy: other e-commerce giants have either made or are in the process of making similar moves. That’s not a criticism of Alibaba. Instead, it seems like a playbook is emerging for e-commerce companies looking to “figure out” logistics.

Here are three major moves Alibaba has made in logistics this year, and where you’ve seen a similar strategy before:

The Move

Alibaba announces a $720 million investment in Huitongda Network. The logistics company will help Alibaba expand its delivery capabilities to rural China, where a significant population of Chinese consumers lives.

Where We’ve Seen It Before

For e-commerce companies, last-mile dominance is now a critical goal. We’ve seen big investments in last-mile delivery from the likes of Amazon, Best Buy, and Target before. E-commerce companies have an obvious incentive to reach all their customers, but rural delivery is arguably the most challenging last-mile lane to fulfill. A long drive with fewer deliveries affects route density, making many rural routes costly. For Amazon, programs like Shipping with Amazon can help achieve greater route density by opening up logistics services to a larger number of sellers. Meanwhile, brick-and-mortar stores with growing e-commerce arms use their physical locations as distribution centers to offset delivery costs.

Read More: Infographic: Retailers Who Are Winning at Logistics

Alibaba’s strategy is slightly different: Huitongda, an e-commerce subsidiary of Jiangsu Five Star Appliances Company, is already a well-established service network in rural areas. To avoid having to build that kind of system from scratch, Alibaba is investing heavily in the development of last-mile delivery for a significant rural consumer population. While not the exact means as Amazon and others, the end is the same: Alibaba wants to win China’s last-mile.

The Move

Alibaba invests $1.38 billion in ZTO Express and lands itself a variety of logistics assets, including ZTO’s own recently-acquired freight-forwarding business, China Oriental Express.

Where We’ve Seen It Before

Much as other e-commerce retailers such as Amazon, Rakuten, and Wayfair have acquired freight forwarding and NVOCC capabilities to realize efficiencies in their imports from China, Alibaba is now equally well-suited to make its mark on international logistics. We’ve said it before: no product can move anywhere in the world without the assistance of a freight forwarder. E-commerce companies realize this but aren’t willing to be passive about it.

Investing in or acquiring companies with established logistics capabilities is a popular move for retail giants: think Target buying Shipt, or Walmart's acquisition of Parcel. While these aren’t traditional freight forwarders, their ready-to-roll delivery infrastructures help e-commerce companies hit the ground running post-acquisition. Alibaba is on a tight schedule and facing fierce competition. Putting money down on a complete freight-management company is an efficient bet.

The Move

At the Global Smart Logistics Summit hosted by Cainiao, Jack Ma announced a US $15 billion investment to help develop a global smart-logistics network. Ma indicated the network would be based on technological advancements including smart warehouses equipped with real-time package tracking and robots, and potentially automated delivery vehicles.

Where We’ve Seen It Before

Ma is talking about a single, unified state-of-the-art logistics network. It’s similar to what Maersk and IBM have promised to build, and what e-commerce companies have been desperate to find or develop over the last few years: a shared ecosystem that gathers data and gives secure transparency at every step of the delivery process. This is a significant investment by Alibaba in a supply chain solution.

In the same announcement, Ma emphasized that the network wouldn’t be a Cainiao/Alibaba exclusive: it’s meant to be a centralized standard environment for all logistics partners. A one-stop, single-platform solution from an e-commerce company would require the transaction and delivery parts of a sale to occur in the same ecosystem. Programs like Amazon Seller Flex and Shipping with Amazon are ready to meet that requirement. Merchants and businesses can use Amazon’s consumer platform to make a sale, then ship their sold goods with Amazon’s logistics services.

Read More: Is Amazon Finally Set to Conquer Freight?

Like Amazon, Alibaba is betting that the future of its retail business depends on its mastery of logistics. Also like Amazon, Alibaba’s plan involves dominating the last mile and investing heavily in technologies that could revolutionize all parts of the supply chain. It remains to be seen if retail’s logistics strategy is the winning formula. But when multiple players converge on the same strategy, it’s often an indicator that they’re headed in the right direction.


Give CoLoadX a try. Sign up for free today.  

Sign up Today

Topics: Ecommerce, Logistics, Logistics News, AliBaba, Amazon, Retail, Innovation

Written by Fauad Shariff

Subscribe to the CoLoadX Newsletter

Lists by Topic

see all

Posts by Topic

see all

Recent Posts