Alibaba logistics arm will put pressure on JD.com Inc: analyst
Cainiao Network, the logistics information systems affiliate of e-commerce giant Alibaba Group, said Monday it had completed an initial round of fundraising, and analysts said the company could be valued at $100 billion in the future.
This is Cainiao's first round of funding since its establishment in 2013, and it attracted prominent investors including Malaysia's Khazanah Nasional Bhd, Singapore's Temasek Holdings and China's Primavera Capital, Cainiao said in a press release sent to the Global Times on Monday.
The press release did not reveal the value of the funding, although it reportedly stood at over 10 billion yuan ($1.54 billion), and a PR representative with Cainiao refused to offer further details when contacted by the Global Times.
The funding will help the market valuation of Cainiao hit more than 50 billion yuan, domestic news portal tech.qq.com reported on Monday.
"Cainiao's valuation will likely grow to $100 billion in the future," Liu Dingding, an industry analyst with Beijing-based market consultancy Sootoo, told the Global Times Monday.
Apart from Alibaba's e-commerce and Internet finance businesses, Liu said the firm also has high hopes for Cainiao, which is expected to become a leading logistics network that can increase the overall efficiency of China's logistics sector, using big data technology and delivery partners across the country.
This is in line with the central government's call for innovative development in the logistics sector in the next five years to accompany supply-side reforms and boost economic growth, Liu noted.
The National Development and Reform Commission said on March 8 that policies would be issued to lower taxes and reduce costs in the logistics sector during the 13th Five-Year Plan period (2016-20).
In 2015, the total value of goods delivered by logistics firms in China was estimated at 220 trillion yuan, up about 70 percent from 2010, according to data from the China Federation of Logistics & Purchasing.
China's economy has relied a lot on e-commerce in recent years, but in the next 10 years, logistics will play an increasingly important role, Cainiao CEO Tong Wenhong was quoted by the press release as saying.
Expanding business
Cainiao, which has registered capital of 5 billion yuan, was jointly established in 2013 by Alibaba, China Yintai Holdings Co and major express delivery firms SF Express Co, STO Express, and Shanghai YTO Express.
Cainiao did not reveal specifically how it would use the money from its first round of fundraising, but analysts said it would go toward the construction of warehouses around the world.
"In order to ensure same-day delivery across the country, Cainiao needs to invest hundreds of billions of yuan in building warehouses and improving technology," said Liu.
The company now has 128 warehouses domestically, and can help its delivery partners offer same-day delivery in 20 cities around the country, according to information Cainiao sent to the Global Times.
Liu noted that construction of warehouses globally will also be an important task for Cainiao, as its parent company Alibaba is pumping up efforts to develop its cross-border e-commerce business.
According to Cainiao's PR representative, the company also has 74 warehouses in China and abroad that are dedicated to cross-border e-commerce.
"With the introduction of new investors, Cainiao's expansion will speed up," said Zhang Yi, CEO of Guangzhou-based iiMedia Research.
This will help make up for Alibaba's shortcomings in logistics so far and will put more pressure on JD.com Inc, China's second-largest online retailer after Alibaba's Tmall, which earned its current position thanks to its self-developed logistics network, Zhang told the Global Times on Monday.
However, Xu Yong, chief advisor with China Express and Logistics Consulting, did not hold such an optimistic attitude toward Cainiao's development, despite the new funding.
"Cainiao has not figured out a very clear business model yet," Xu told the Global Times Monday.
