Alibaba is spending US$807 million to increase its ownership of loss-making Cainiao Smart Logistics Network from 47 per cent to a majority stake of 51 per cent.
Cainiao was founded in 2013 by an Alibaba-led consortium and, at last count, its platform processed around 55 million packages per day on Alibaba’s China marketplaces.
Cainiao is different from other logistics businesses which own 100 per cent of their assets. While it owns some warehouses, Cainiao also operates a data and logistics platform that allows merchants to choose from a network of partner couriers in an attempt to bring together a fragmented industry.
Alibaba also announced plans to invest US$15.2 billion over the next five years to further strengthen its global logistics network. The Chinese ecommerce giant has set itself an ambitious target of fulfilling online orders within 24 hours in China and within 72 hours anywhere in the world.
The new investment is expected to enhance the overall logistics experience for consumers and merchants across the Alibaba ecosystem, as well as to enable greater efficiencies and lower costs in China’s logistics sector, the company said.
“Our goal with this investment is to provide comprehensive, first-class experience for consumers globally,” said Daniel Zhang, CEO of Alibaba Group.
“Our commitment to Cainiao and additional investment in logistics demonstrate Alibaba’s commitment to building the most-efficient logistic network in China and around the world. By enhancing the logistics capabilities within the Alibaba ecosystem and extending our investment in this sector, we are further enabling our new retail strategy to bring online and offline retail into one seamless experience for shoppers. We will also continue to deepen our collaboration with various logistics partners to achieve this goal.”
As part of the deal, Alibaba will gain one additional seat on Cainiao’s board of directors, increasing its board representation to four out of seven seats.
Following the completion of the transaction in October 2017 the financial results of Cainiao will be consolidated under Alibaba Group and reported as part of the core commerce business segment.
This move may simplify Alibaba’s accounting practices. The accounting for its affiliate Cainiao Network was one of the issues which prompted the SEC investigation into Alibaba’s books, which was made public in May 2016.