An initial investment of 1 billion yuan ($154 million) was received by Cainiao Network, the logistics affiliate of Alibaba Group Holding, to get its logistics alliance ready for the expected surge of parcels, as the government expressed its support for rural and cross-border e-commerce, the company announced on Monday, March 28.
In a press conference held in Hangzhou, capital of Zhejiang Province, Cainiao CEO Tong Wenhong said that Cainiao is expected to help its delivery partners have the capacity to deliver 100 billion parcels annually, within five to eight years.
The Global Times quoted Tong as saying that about 20.6 billion parcels, up from 860 million a decade earlier, were generated by Chinese e-commerce last year.
According to analysts, Alibaba is expecting Cainiao to make up for its shortcomings in logistics relative to JD.com Inc. and Amazon.com Inc.
"With the help of its delivery partners, Cainiao will have a stronger delivery capacity than either JD or Amazon does in China," Liu Dingding, an industry analyst with Beijing-based market research firm Sootoo, told the Global Times.
Alibaba and three leading domestic express delivery firms--namely, SF Express Co., STO Express and Shanghai YTO Express--have jointly established Cainiao in 2013.
The report said that with more than 128 warehouses nationwide, the alliance can help its delivery partners offer same-day service in 12 cities around the country.
Part of Alibaba's recent diversification strategy and efforts in the logistics sector include the exploration of new opportunities in industries such as entertainment and Internet finance.
"Alibaba has to seek new growth points to offset potential risks that its core online marketplace Taobao may face due to uncertain regulations in China and a worldwide crackdown on counterfeit goods," said Shao Zhonglin, an industry analyst at Shanghai-based market consultancy yongyiresearch.com.
Despite being under pressure over suspected sales of counterfeit goods on its platform, Taobao managed to contribute 58.4 percent to Alibaba's total gross merchandise value of 964 billion yuan in the quarter ending Dec. 2015.
At the conference on Monday, Alibaba CEO Zhang Yong said that it is expecting Cainiao to set up a smart logistics system that can make the domestic logistics industry more efficient.
Meanwhile, Liu was optimistic about Cainiao's future as he said that the company's effort is in line with the central government's call to develop the logistics sector in the next five years, along with reforms on the supply-side, to enhance economic growth. Cainiao could eventually be valued at $100 billion, as Liu estimated.
During the press conference, Cainiao also vowed to give retailers a 50-percent discount in service fees if they sign in the cooperative agreements with the company before May 28.