ZTO Express (Cayman) Inc., a leading Chinese express delivery company, announced on Tuesday May 29th that it will receive a strategic investment of US$1.38 billion from Alibaba Group Holding Limited and its logistic arm Cainiao Network Technology Co., Ltd. , while giving the investors 10% of the equity in return.
The investment will allow Cainiao and ZTO to meet the growing demands of “New Retail”, a term coined by Alibaba to represent the integration of online and offline commerce. This investment will support both Cainiao and ZTO in building up first- and last-mile pickup and delivery capabilities, warehouse management, cross-border logistics, technology-driven smart solutions and so on.
This is not the first time Alibaba, with its core business built upon e-commerce, has taken a stake in a logistics company. Alibaba holds a 23.4% stake in ZTO’s rival express delivery firm Best Inc, while they took a minority stake in another logistics giant YTO Express for an undisclosed amount. Alibaba also has about 20% stake in Chinese eletronics retailer Suning Commerce Group Co. Ltd. who bought a 70% stake in Tian Tian Express in 2017.
The three publicly listed companies ZTO, YTO, and Best have parcel volumes of 6.22 billion, 5.064 billion, and 3.77 billion respectively in 2017. Together they are responsible for delivering 37.6% of the total 40 billion parcels in China last year.
Cainiao Network itself was founded by a Alibaba-lead consortium in 2013 and Alibaba Group owns 47% of the company. It now is running “same-day and next-day arrival” delivery service in nearly 1,500 districts and counties in China, and operates Cainiao Post, a network of last-mile stations covering communities in major cities and university campuses across the country.
“This strategic investment will strengthen synergies across our mutual businesses to create new value and improved experience for merchants and consumers.”
China has a highly competitive logistics industry with its own unique features which present plenty of new opportunities ahead, according to Lin Wan, President of Cainiao Network.
“This investment will enable Cainiao and ZTO to supercharge joint innovation and development to accelerate digitalization of the industry,” he added.