Cainiao, e-commerce giant Alibaba’s logistics arm, announced on Friday it will launch more than 800 international cargo flights by the end of 2021 to connect China’s Hainan Island and countries including Japan, South Korea, Australia, New Zealand and Europe, as part of a broader effort to satisfy growing domestic demand for luxury goods.
The company also unveiled a strategic plan to implement global smart supply chain technologies in Hainan, which serves as a free trade port due to relaxed tax policies. Other moves would include constructing the largest smart warehouse on the island, equipped with over 100 AGV robots, developing a digitized logistics system to shorten the processing time from 3 minutes to 70 seconds, providing full-chain logistics services for local duty-free shop Global Premium Plaza, and expanding warehouse space in the island’s bonded zone to 150,000 square meters in the next three years.
“Smart logistics and supply chain will continue to play an instrumental and fundamental role in facilitating global trade and e-commerce,” James Zhao, Cainiao’s General Manager of Global Supply Chain, said in a statement. “Leveraging Cainiao’s global smart supply chain capabilities, we aim to provide a stable and highly efficient logistics network across the Greater Bay Area, Hainan and Southeast Asia.”
Last month, Cainiao started running daily freight flights between Singapore and Hainan to transport duty-free luxury goods, as Covid-related travel restrictions have trapped Chinese consumers on the mainland.
According to a report by consulting firm Bain & Company, the global luxury market shrunk by 23% in 2020, but the consumption of luxury goods in China rose by 48%. The country’s share of the world’s luxury market has grown from 11% in 2019 to 20% in 2020.
The consultancy also predicted that China is on track to become the world’s biggest luxury market by 2025, and e-commerce channels like Alibaba’s Tmall will continue to lead online growth. The country’s annual luxury online penetration increased to 23% in 2020 from 13% in 2019, according to the report.
To boost domestic consumption, the Chinese government last year tripled the value of duty-free goods that consumers could buy annually in Hainan to 100,000 yuan ($1540) and removed a cap of 8,000 yuan ($1232) for a single item. It also expanded the number of duty-free product categories from 38 to 45.
SEE ALSO: Alibaba’s Cainiao Launches Airline between Singapore and Hainan to Meet Growing Chinese Demand for Luxury Goods
Three licenses were issued in a single year, which allowed new retail players to jump into the market and operate duty-free shops on the island, compared to just seven licenses that had been given since the 1980s. These stimulus efforts have turned the tropical destination into a shopping paradise. In 2020, sales at Hainan’s duty-free shops reached 32.7 billion yuan ($5 billion), an increase of 127% year-on-year.