Thursday , December 14 2017
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Alibaba logistics arm gets Temasek, GIC funds

Alibaba Group Holding Ltd’s logistics offshoot Cainiao has attracted investment from Malaysia and Singapore, including Temasek Holdings Pte, in its first round of external fundraising since being created in 2013.

Zhejiang Cainiao Supply Chain Management Co, to give its full name, also gained funding from global investment firm GIC Pte and sovereign wealth fund Khazanah Nasional Bhd which is expected to bankroll its expansion, according to a statement on Monday.

The company declined to specify the amounts raised or the stakes sold, although Caixin reported that its delivery network is now valued at about 50 billion yuan ($7.7 billion) as a result of the funding round.

Cainiao facilitates the delivery of 70 percent of China’s express packages using a network spanning 2,800 counties at home, and in 224 countries and regions globally.

Chief Executive Officer Tong Wenhong said the company is now angling toward a public offering to bankroll further expansion.

“If e-commerce was the focus of China’s economy in the past 10 years, logistics will be the focus for the next 10,” Tong said in the statement.

In an interview with Sina.com on Monday, she said most of China’s e-commerce firms have built their own logistics networks to deliver goods, including huge and expensive investment in warehouses and delivery teams, and led to losses in many cases.

“But in fact, the logistics industry can use big data and collaboration to reduce costs and increase efficiency,” she said.

Founded by Alibaba with a consortium of logistics companies, however, Cainiao is different in that rather than expanding its own network it operates a proprietary logistics information platform, that links a network of providers, warehouses and distribution centers, which offers efficiency and cost savings.

The new investment, Tong said, will be used to build up Cainiao’s core businesses, including its own warehouses and cross-border delivery services, expand its rural delivery abilities and support its business partners.

Alibaba initially had a 48 percent stake in Cainiao after creating it with department store chain Intime Retail Group Co and industrial conglomerate Fosun International Ltd. The business had 700 employees in June last year.

China’s logistic cost accounted for 16 percent of the country’s GDP in 2015, creating 30 million jobs, according to the China Federation of Logistics & Purchasing.

The sector’s dramatic growth has been largely driven by China’s rapidly expanding online retail market, which itself was worth 3.83 trillion yuan in 2015.

Statistics from China Express Association show that as many as 20.6 billion parcels were delivered last year, a 48 percent increase.

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