Alibaba pens de­liv­ery deal with China Post to boost e-com­merce

China Daily (Canada) - - BUSINESS - By MENGJING mengjing@chi­

Alibaba Group Hold­ing Ltd inked a strate­gic co­op­er­a­tion agree­ment with the Sta­te­owned China Post Group on Thurs­day, a move that is ex­pected to boost the e-com­merce gi­ant’s pres­ence in lower-tier cities.

Un­der the part­ner­ship, Alibaba Group and China Post, the world’s largest postal net­work, will col­lab­o­rate on lo­gis­tics, e-com­merce, fi­nance and in­for­ma­tion se­cu­rity, jointly de­vel­op­ing new busi­ness and new­mar­kets.

The area of e-com­merce lo­gis­tics is no doubt where the two sides see the most po­ten­tial. In a state­ment is­sued by China Post, the two will open up their ware­houses, pro­cess­ing cen­ters and de­liv­ery re­sources to each other, build­ing an e-com­merce lo­gis­tics plat­form that will serve third­party couri­ers in China.

China Post is ex­pected to open up its 100,000 ser­vice points in China’s de­vel­oped first-tier cities to less-de­vel­oped vil­lages, pro­vid­ing both de­liv­ery and pickup ser­vices for on­line re­tail­ers and shop­pers in or­der to give these re­mote ar­eas an im­proved e-com­merce ex­pe­ri­ence.

JackMa, chair­man of Alibaba Group, said at a sign­ing cer­e­mony in Bei­jing that “China will see the emer­gence of on­line plat­forms that can han­dle trans­ac­tions of more than 10 tril­lion yuan ($1.6 tril­lion) a year. We need to make sure that the de­vel­op­ment of a the ex­pected an­nual trans­ac­tion vol­ume of on­line plat­forms lo­gis­tics sys­tem in China can sup­port the surg­ing de­vel­op­ment of e-com­merce,” he said, adding that third- and fourthtier cities and ru­ral ar­eas of­fer “unimag­in­able growth po­ten­tial”.

LinWen­bin, an an­a­lyst with IT con­sul­tancy Analysys In­ter­na­tional, said that the part­ner­ship with China Post is in line with Alibaba’s goal of low­ertier city pen­e­tra­tion. “Thir­dand fourth-tier cities all have greater po­ten­tial in terms of e-com­merce be­cause there is a lack of busi­ness in­fra­struc­ture, such as shop­ping malls,” he said.

“More­over, people there have less pres­sure from high hous­ing prices and tight work sched­ules com­pared with those­who­live in mega-cities in China, so the con­sump­tion power in lower-tier cites can­not be un­der­es­ti­mated,” he added. De­spite the fact that most of the ex­press de­liv­ery mar­ket in first-tier cities is­han­dled by pri­vate couri­ers, China Post has the most de­liv­ery net­works in lower-tier cities, es­pe­cially vil­lages, he said.

In De­cem­ber of last year, Alibaba Group in­vested $240 mil­lion into Goo­day­mart, a Haier Elec­tron­ics sub­sidiary that in­cludes ex­ten­sive ware­houses and dis­tri­bu­tion sites in more than 2,800 coun­ties across China and op­er­ates more than 17,000 ser­vice points.

Alibaba Group’s e-com­merce ri­val in China,, also sees lower-city pen­e­tra­tion as a pri­or­ity in 2014. Ear­lier this year, the sec­ond-largest busi­ness-to-cus­tomer e-com­merce busi­ness in China teamed up with more than 10,000 con­ve­nience stores from 15 cities — mostly in third-tier cities in western and cen­tral China.

“Through help­ing con­ve­nience stores re­or­ga­nize their re­sources and train­ing their em­ploy­ees, we are go­ing to build an in­te­grated sys­tem that al­lows people to make on­line pur­chases from the near­est con­ve­nience store and re­ceive their de­liv­ery within one hour,” Hou Yi, who is in charge of lo­gis­tics plan­ning at JD, said at a news con­fer­ence in­March.

The Alibaba-China Post part­ner­ship rep­re­sents the e-com­merce’s gi­ant’s lo­gis­tics strat­egy of in­vest­ing in, rather than own­ing, dis­tri­bu­tion in­fra­struc­ture such as ware­houses and de­liv­ery ve­hi­cles. Creat­in­glo­gis­tic­ssys­tems­from scratch and run­ning a na­tional de­liv­ery team is an ex­pense that even­tu­al­ly­would­put­pres­sure on on­line re­tail­ers’ profit mar­gins, an­a­lysts said.

But Lin of Analysys In­ter­na­tional said that the ef­fec­tive­ness of this col­lab­o­ra­tion is yet to be seen. “Af­ter all, China Post is a State-owned en­ter­prise, and Alibaba Group has deep roots in pri­vate sec­tors. They need to find a way to make the co­op­er­a­tion work de­spite the dif­fer­ence in cor­po­rate cul­ture,” he said.

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