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January 20, 2011

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Alibaba eyes storage system

ALIBABA Group yesterday said it plans to invest 20 billion to 30 billion yuan (US$3 billion to US$4.5 billion) with other partners to build a nationwide warehouse network to tap the growing logistics demand of online vendors.

The investment will be made over three to five years and will be aimed mainly at building warehouses and also supporting logistics firms, the company said.

Of the investment, 10 billion yuan will be Alibaba's own money, the company said.

Part of the investment may be made via a fund to be set up with private-equity and venture capital firms, Alibaba executive vice president Ming Zeng said.

Saying that it welcomes partnerships in an open and flexible way, the company also hopes to raise no less than 100 billion yuan with other e-commerce firms and partners in the mid-to-long-term to develop a modern logistics system.

"Creating a network of warehouse facilities is a key tactic in our strategy to resolve issues facing the logistics industry in China," said Zhang Wei, senior vice president of Alibaba Group and head of its strategic investment team. "We welcome venture capital firms and private equities to participate in the project."

The firm will invest in warehouses of 1 million square meters each in the Yangtze River Delta region as well as in Beijing and Guangzhou, said Tong Wenhong, Alibaba Group's vice president.

Sources told Reuters in October that Alibaba Group planned to grow its logistics network to reach 52 cities in two years from 20 cities now.

"The ultimate goal is after 10 years, anyone placing an order online from anywhere in China will be able to receive their package within eight hours," Alibaba Group chairman and chief executive officer Jack Ma said in a statement.

China's e-commerce market was worth 119.1 billion yuan in transaction value in the second quarter of last year, of which Alibaba unit Taobao, a consumer-oriented shopping website, had a 75.2 percent market share.

With about 30 percent of China's 420 million strong Internet users shopping online, logistics is one of the biggest barriers to e-commerce.

"All these bottleneck (issues) is because e-commerce in China is growing too fast and exceeds the physical capacity of logistic companies ... it's actually a great opportunity," Ming told a group interview.

Taobao's daily orders could reach 20 million in 2012, up from 8 million currently, Ma said.


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