Proving the Business Case for the Internet of Things

Alibaba plans RMB100bn investment in smart logistics

Steve Rogerson
October 10, 2017

Chinese e-commerce group Alibaba is to take a majority stake in its logistics affiliate Cainiao Network. The additional investment of RMB5.3bn will increase Alibaba's stake to 51%. Alibaba also plans to invest RMB100bn over the next five years in smart logistics technology.
All this is part of its New Retail strategy and strengthening its global logistics network to realise its mission of fulfilling orders in China within 24 hours and within 72 hours anywhere in the world. These investments are expected to enhance the overall logistics experience for consumers and merchants across the Alibaba ecosystem, as well as to enable efficiencies and lower costs in China's logistics sector.
Upon completion, Alibaba's stake in Cainiao will increase from 47 to 51%, and Alibaba will gain one additional new seat on Cainiao's board of directors, increasing its board representation to four out of seven seats.
The additional investment of RMB100bn over the next five years will be used to increase R&D in logistics data technology, as well as for development of smart warehousing, smart delivery and global logistics infrastructure, all of which are core to building the global logistics network of the future.
"Our goal with this investment is to provide comprehensive, first-class experience for consumers globally," said Daniel Zhang, CEO of Alibaba Group. "Our commitment to Cainiao and additional investment in logistics demonstrate Alibaba's commitment to building the most-efficient logistic network in China and around the world. By enhancing the logistics capabilities within the Alibaba ecosystem and extending our investment in this sector, we are further enabling our New Retail strategy to bring online and offline retail into one seamless experience for shoppers. We will also continue to deepen our collaboration with various logistics partners to achieve this goal."
This transaction is expected to be completed this month, subject to satisfaction of customary closing conditions. Following the completion of the transaction, financial results of Cainiao will be consolidated under Alibaba Group and reported as part of the core commerce business segment.
Credit Suisse acted as financial advisor to Alibaba and Morgan Stanley acted as financial advisor to Cainiao.
Cainiao Network is dedicated to meeting the current and future logistics demands of China's online and mobile commerce sector. It operates a logistics data platform that leverages the capacity and capabilities of logistics partners to fulfil transactions between merchants and consumers at a large scale. It also uses data insights and technology to improve efficiency across the logistics value chain.