Weekly Briefing: SF Express vs Cainiao – Another proxy battle between Tencent and Alibaba

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SF Express, one of China’s largest and most valuable courier companies, is claiming that Cainiao, an Alibaba logistics affiliate, has removed them as a shipping option. From South China Morning Post:

At issue is access to data about the merchants that sell their products, and the shoppers that placed those orders. SF Express claimed in a Shenzhen stock exchange filing that Cainiao had removed it as a shipping option, and blocked access to data. Cainiao – controlled by Alibaba, which owns the South China Morning Post – responded by saying it was the courier that first walled off vital information.

Bloomberg has more detail on Cainiao’s response:

“We are surprised and disappointed by SF’s abrupt action to stop providing the information that is necessary for the smooth completion of parcel deliveries,” Cainiao said in an emailed statement. “To protect more than a million of consumers and merchants from potential parcel losses, we have no option but to remove SF as a delivery option on Cainiao’s network.”

Logistics has been one the biggest pain points for the growth of e-commerce in China. Unlike the US where the USPS was robust enough for Amazon to build their business, China Post was another typical example of what happens under a bureaucracy: it was slow and unreliable. Out of this came a myriad of courier and delivery companies: SF Express, YTO Express, ZTO Express, and many more. However, in order to ensure that Taobao and Tmall customers and merchants could not only better manage their deliveries but also deliver them faster, Alibaba created Cainiao in 2013.

Cainiao acts as a one-stop place for customers and merchants to easily track and manage deliveries (Alibaba has bigger plans for it, saying they will build delivery hubs around the country). Conspicuously absent from the Cainiao platform are any and all deliveries from JD (京东) who have their own in-house courier service.

A web of alliances

Much of this conflict is about data and, more importantly, who has access to that data. Tencent owns a 15% stake in JD and, as you can imagine, is loathe to share potentially valuable customer data with its arch-rival Alibaba. Indeed, just after the spat between SF Express and Cainiao went public, Jingdong, Meituan-Dianping (of which Tencent owns a large stake), NetEase, and Tencent all announced partnerships with or support of SF Express(in Chinese).

This type of back and forth, he-said-she-said is not new to the Chinese tech industry and, at this point, it doesn’t really matter who shut out who first. What does matter is that SF Express has clearly taken a side. Indeed, from what I and others have gathered, much of this kerfuffle started because SF Express was using Tencent’s cloud services and didn’t want to migrate to a service operated by Alibaba.

A web of data

Data is what makes the internet go ‘round. More and more the data generated by any given company can actually be worth more than the actual service or product they provide.

Both Alibaba and Tencent are savvy companies who both clearly understand what it will take to succeed as the internet economy is evolving. While Baidu has, perhaps for the time being, faded into the background, the battle for dominance has fallen to Tencent and Alibaba. While their backgrounds are quite different (social and gaming for Tencent and e-commerce for Alibaba), they continue to find points of friction in their own products (Tencent Pay vs Alipay) and in their investments into the same verticals with logistics being the most recent battleground.