Alibaba to Build Logistics Network to Enable Same-day Delivery on Every Corner of China

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img:jinghua.cn

China Smart Logistic Network, or CSN, a logistics program aiming for supporting 30 billion yuan ($4.8 billion) worth of daily online sales and making same-day delivery available on every corner in China.

Led by Alibaba, the project is joined by major delivery services, e-commerce players like Yintai, investment and financial institutions. Alibaba Jack Ma will be the president of the newly established enterprise and the chairman of Yintai, Shen Guojun, will be the CEO.

It is expected that it will take eight to ten years to finish the project. The first investment will be 100 billion yuan ($16 billion). The existing participating members and future newcomers need to agree to keep injecting funding in the coming five to eight years

About eight places in China will be chosen to be first-tier hubs and sub-networks will be formed around them so that the entire network will cover the whole country. It will open up to manufacturers, online sellers, delivery services and third-party service providers to help build the end-to-end chain. The logistics efficiency is expected to be improved through well-organized warehouse and logistics infrastructure.

The first hub is settled on Jinhua, a city not far from Alibaba. In November 2012, the city reached deals with three nationwide delivery services who would build business there.

Currently daily parcels generated from Taobao and Tmall are over 12 million. At peak, on the annual promotion day, 11th Novermeber, 2012, the number was 72 million. Logistics companies have benefited from the expanding e-commerce market. It is projected the demand for delivery services will grow along with the rapid growth of e-commerce.

As early as January 2011, Jack Ma announced a logistics strategy, planning to build a warehouse platform and information management system. The company also invited partners to co-invest in it back then. But no news followed up until now.

Given the role of Alibaba in it, the project is seen as a fight-back against 360Buy who has built a combined inventory space of over one million square meters and put in 3.6 billion yuan into logistics system last year alone.

Building a logistics and warehouse system on its own is never Alibaba’s style. That’s why it would invite companies from all aspects to participate in it. Also, it wants to have third parties to figure out their own positions in an ecosystem, just the same with how the company did with Taobao and Tmall. As Jack Ma always iterated that he doesn’t want to see a few giants on his platforms but small businesses that form a controllable ecosystem.

But people doubt Alibaba can beat 360Buy on this front, citing that the latter came to where it is all the way from a mortar and brick store, a B2C retailer to a platform that inventory management and logistics have always been part of its job in the past ten years. It may take more time and effort to sort out the logistics business than add payment and financial services – what 360Buy is doing in order to catch up with Tmall. As 360Buy CEO put it, catching up with Tmall is just a matter of time.

Anyway, building a more efficient logistics system to make online shopping more enjoyable must be welcomed by consumers.