Alibaba launching logistics network

Alibaba Group, China's largest e-commerce company, said Thursday it has teamed up with major express delivery companies and property developers to launch the China Smart Logistic Network (CSN), with an initial investment of 100 billion yuan ($16 billion), to facilitate the country's fast-growing e-commerce business.

The network project, initiated by Alibaba, has attracted courier firms such as SF Express and Shanghai YTO Express (Logistics) Co, property developer China Yintai Holdings Co, and investment company Fosun Group, Alibaba said in a statement sent to the Global Times on Thursday.

Within eight to 10 years, Alibaba aims to build a nationwide logistics network that can sustain a daily e-commerce business of 30 billion yuan and enable packages to be delivered to every part of the country within 24 hours.

The participants will set up a new venture, with Alibaba's CEO Jack Ma Yun as chairman and Yintai's chairman Shen Guojun as CEO. First-stage investment will amount to 100 billion yuan, Alibaba said.

Alibaba announced last week that Ma will step down from his post as CEO in May while remaining full-time chairman of the e-commerce group.

"Ma's new title indicates that he will focus on the construction of the logistics network, as the sector is one of the main barriers to Alibaba's e-commerce business," Su Huiyan, an analyst at iResearch Consulting Group, told the Global Times on Thursday.

The average number of daily packages shipped by Alibaba's e-commerce platforms Taobao and Tmall surpassed 12 million in 2012. During the online sales promotions for 2012's Singles' Day (November 11), the number topped 72 million, data from Alibaba showed.

Alibaba said launching the network does not mean that it will enter the logistics or express delivery industries, and the network is open to manufacturers, e-commerce companies and courier firms.

"Alibaba accounts for more than half of China's online retail market, so a self-built logistics system not only takes a lot of investment but might also result in a monopoly in the express delivery sector," Feng Lin, a researcher at China e-Business Research Center, told the Global Times on Thursday.

Other major online retailers such as 360buy.com, Suning and Vancl have chosen to build their own logistics systems.

"Building a self-owned logistics system can help improve customer service, but it requires a large investment and takes a long time," Su said.

Analysts also expressed concerns about the future operation of the Alibaba alliance, as Alibaba noted that companies involved in the project should not expect a return on investment for five to eight years.

"Companies might lack impetus to join the network. Furthermore, how to share earnings between Alibaba and other participants will be a problem," Feng said.