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Alibaba unveils grand logistics plan
January 31, 2013, Thursday
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ALIBABA, China's largest e-commerce group, said it's joining hands with partners to build a logistics network to support the future growth of online shopping and defend its market dominance against strong rivals.
The group said it is committing an initial investment of up to 100 billion yuan (US$16.1 billion) for a project that will take 10 years to complete.
The new network, when fully operational, would be able to handle orders of as much as 30 billion yuan a day.
Other participants in the so-called "China Smart Logistics Network" include Fosun International, Yintai Holdings Co and a number of other logistics firms.
Alibaba said the network will support tens of millions of start-up firms, and anyone using the network would be able to get goods delivered anywhere in the country within 24 hours.
Alibaba Chairman Jack Ma will chair the project, and Shen Guojun from Yintai Holdings will be the chief executive officer.
The partners didn't disclose exactly how smart the new network will be. Industry analysts are guessing that it will be able to attract independent vendors, much as Alibaba's online marketplace Taobao attracts small business owners to sell products free of charge.
In 2011, Alibaba and partners said they would invest up to 30 billion yuan to build a warehouse and information management system. The recent announcement provided the first details of that strategy.
It's a shot across the bow at online rivals such as 360Buy and Tencent-backed 51Buy.
Logistics occupies a prominent place in the strategies of e-commerce companies. It is the conveyor belt that links a consumer's surfing and orders to goods arriving on the doorstep. Smooth and quick delivery is considered essential in attracting and keeping customers.
Booming packages
On a normal day, more than 12 million packages from orders on Taobao require delivery around the country.
On so-called Singles Day last November 11, as many as 72 million packages were generated on Taobao after more than 50,000 vendors promised at least 50 percent discounts.
Mainstream express delivery companies are clearly not able to meet the demand and ensure prompt deliveries.
In fact, complaints about delivery services are common among consumers. Buyer comments posted online frequently go along these lines: "I like the product a lot, but I strongly suggest you replace the courier company because the delivery took too long."
Last year, the number of express delivery packages in China increased 55 percent, according to the State Post Bureau, but complaints about delays more than doubled in the same period.
Taobao introduced an evaluation system several years back that allows buyers to grade each vendor's service, including the efficiency of delivery.
Shao Xiaofeng, Alibaba's chief risk officer, said improving logistics services is a key challenge for further growth at Alibaba.
Many independent vendors on Taobao have their own say about which courier company they choose for delivery, but complaints about delivery times and the state of packages when they arrive on the doorstep continue to prompt angry messages on the Taobao web pages of vendors.
The picture is different for independent shopping sites that have poured large amounts of cash into building their own logistics networks and have hired delivery staff to ensure after-sale service.
360Buy began construction on a series of warehouses covering 80,000 square meters in the Jiading District of Shanghai in 2009. The company's delivery network now covers more than 360 domestic cities.
51Buy has been promising delivery within 24 hours on orders in major cities like Beijing and Shanghai.
Keeping foothold
A number of online shopping sites have been stepping efforts to address consumer concerns.
For example, Shanghai-based Yihaodian, in which global retail giant Walmart is a major shareholder, now allows buyers to select the time-period preferred for receiving their packages, with 3 yuan added to each order to cover the cost of fast delivery.
Amazon.cn offers a 3 yuan discount for buyers choosing to have packages delivered within 4 to 7 days of ordering - several days longer than the usual delivery process.
Even with all the promises, delivery times can be dodgy.
A friend of mine who works in Beijing grumbled earlier this month that she couldn't find an online vendor or a courier service that could deliver her an anti-pollution mask by the next morning, when heavy haze and smog shrouded the capital.
Consumers can afford to be picky because the online market is so competitive.
According to Internet consultancy iResearch Inc, last year TMall took up 56.7 percent market share in China's total transaction volume of online B2C shopping, followed by 19.6 percent taken by 360Buy.
Jack Ma has been touting the importance of Internet infrastructure, the so-called "electricity and water of the virtual world." That broad realm includes online payment platforms, credit systems and logistics.
Still, challenges and uncertainties lie ahead for Alibaba's ambitious logistics project.
"With several parties participating in the project, it's hard to ensure uniformity in service standards," said Li Chengdong, an independent e-commerce analyst. "The final result could depend on details yet to be revealed."
Ma certainly has time to flesh out the details, now that he's stepping down as chief executive of the company he founded. He will remain as chairman and chief visionary for Alibaba.
The group said it is committing an initial investment of up to 100 billion yuan (US$16.1 billion) for a project that will take 10 years to complete.
The new network, when fully operational, would be able to handle orders of as much as 30 billion yuan a day.
Other participants in the so-called "China Smart Logistics Network" include Fosun International, Yintai Holdings Co and a number of other logistics firms.
Alibaba said the network will support tens of millions of start-up firms, and anyone using the network would be able to get goods delivered anywhere in the country within 24 hours.
Alibaba Chairman Jack Ma will chair the project, and Shen Guojun from Yintai Holdings will be the chief executive officer.
The partners didn't disclose exactly how smart the new network will be. Industry analysts are guessing that it will be able to attract independent vendors, much as Alibaba's online marketplace Taobao attracts small business owners to sell products free of charge.
In 2011, Alibaba and partners said they would invest up to 30 billion yuan to build a warehouse and information management system. The recent announcement provided the first details of that strategy.
It's a shot across the bow at online rivals such as 360Buy and Tencent-backed 51Buy.
Logistics occupies a prominent place in the strategies of e-commerce companies. It is the conveyor belt that links a consumer's surfing and orders to goods arriving on the doorstep. Smooth and quick delivery is considered essential in attracting and keeping customers.
Booming packages
On a normal day, more than 12 million packages from orders on Taobao require delivery around the country.
On so-called Singles Day last November 11, as many as 72 million packages were generated on Taobao after more than 50,000 vendors promised at least 50 percent discounts.
Mainstream express delivery companies are clearly not able to meet the demand and ensure prompt deliveries.
In fact, complaints about delivery services are common among consumers. Buyer comments posted online frequently go along these lines: "I like the product a lot, but I strongly suggest you replace the courier company because the delivery took too long."
Last year, the number of express delivery packages in China increased 55 percent, according to the State Post Bureau, but complaints about delays more than doubled in the same period.
Taobao introduced an evaluation system several years back that allows buyers to grade each vendor's service, including the efficiency of delivery.
Shao Xiaofeng, Alibaba's chief risk officer, said improving logistics services is a key challenge for further growth at Alibaba.
Many independent vendors on Taobao have their own say about which courier company they choose for delivery, but complaints about delivery times and the state of packages when they arrive on the doorstep continue to prompt angry messages on the Taobao web pages of vendors.
The picture is different for independent shopping sites that have poured large amounts of cash into building their own logistics networks and have hired delivery staff to ensure after-sale service.
360Buy began construction on a series of warehouses covering 80,000 square meters in the Jiading District of Shanghai in 2009. The company's delivery network now covers more than 360 domestic cities.
51Buy has been promising delivery within 24 hours on orders in major cities like Beijing and Shanghai.
Keeping foothold
A number of online shopping sites have been stepping efforts to address consumer concerns.
For example, Shanghai-based Yihaodian, in which global retail giant Walmart is a major shareholder, now allows buyers to select the time-period preferred for receiving their packages, with 3 yuan added to each order to cover the cost of fast delivery.
Amazon.cn offers a 3 yuan discount for buyers choosing to have packages delivered within 4 to 7 days of ordering - several days longer than the usual delivery process.
Even with all the promises, delivery times can be dodgy.
A friend of mine who works in Beijing grumbled earlier this month that she couldn't find an online vendor or a courier service that could deliver her an anti-pollution mask by the next morning, when heavy haze and smog shrouded the capital.
Consumers can afford to be picky because the online market is so competitive.
According to Internet consultancy iResearch Inc, last year TMall took up 56.7 percent market share in China's total transaction volume of online B2C shopping, followed by 19.6 percent taken by 360Buy.
Jack Ma has been touting the importance of Internet infrastructure, the so-called "electricity and water of the virtual world." That broad realm includes online payment platforms, credit systems and logistics.
Still, challenges and uncertainties lie ahead for Alibaba's ambitious logistics project.
"With several parties participating in the project, it's hard to ensure uniformity in service standards," said Li Chengdong, an independent e-commerce analyst. "The final result could depend on details yet to be revealed."
Ma certainly has time to flesh out the details, now that he's stepping down as chief executive of the company he founded. He will remain as chairman and chief visionary for Alibaba.
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