A Closer Look at Alibaba’s Logistics Arm, Cainiao’s Globalization Journey

8 years of smart logistics journey and we are just getting started!

How It All Started

Back in 2013, China was experiencing a massive boom in eCommerce, handling millions of parcels daily. However, the existing logistics infrastructure was not sufficient to meet the growing demands of the businesses and consumers. This inspired Alibaba to join hands with leading courier companies and large logistics companies to establish a technology-based logistics platform and Cainiao was born.

The objective was to leverage Alibaba’s technological capabilities to instill greater efficiencies across the entire value chain and across all logistics players.

Alibaba’s Globalization Journey

Cross-Border eCommerce Fuelling Growth

Increasing internet and smartphone penetration has accelerated globalization and the rise of a digital economy, with greater cross-border trade and eCommerce activities. Alibaba, since its founding in 1999, has played an instrumental role in the expansion of cross-border eCommerce between China and the rest of the world.

The volume of cross-border eCommerce transactions has been increasing year-on-year, with an average annual compound growth rate of over 20 per cent. In 2019, this exceeded RMB 10 trillion in China, with a YoY increase of 16.67 per cent.

According to calculations by the Alibaba Cross-border E-commerce Research Center, the scale of cross-border e-commerce transactions in China can still maintain an average annual compound growth rate of 20.1 per cent, and the proportion of imports and exports exceeds 37 per cent.

One Belt One Road to Support Business Expansion

As of the end of 2019, China has signed eCommerce corporation memorandums with 22 countries and regions, and established bilateral eCommerce ties. Cross-border eCommerce transactions between China and countries within the Belt and Road initiative increased by more than 20 per cent year-on-year. Going forward, this initiative will help drive the expansion of cross-border eCommerce along the Belt and Road route, and along with that, the demand for a high efficiency eCommerce logistics network.

Alibaba’s Ecosystem of eCommerce Businesses

Under the globalization strategy, Alibaba is actively expanding its footprint globally and establishing an integrated eCommerce ecosystem. Today, Alibaba’s eCommerce business units include Alibaba.com B2B business, Taobao, AliExpress, Lazada in Southeast Asia and import B2C businesses Tmall and Koala.com.

The diverse range of eCommerce platforms allows Alibaba to tailor its offerings to suit different markets, consumer needs and business types while retaining the localization element which is crucial for success in-region.

A Strong Infrastructure Bolstering eCommerce Growth

An organic extension of the eCommerce business would be payment, logistics and cloud. Here, Alipay of ANT Group, Cainiao Network and Alibaba Cloud serve these needs respectively.

Alipay has been expanding overseas since 2014. It has strategically invested in Paytm, Ascend Money, M-Daq, KaKao Pay and other companies, and established joint ventures in Australia, Indonesia, Malaysia and other places to build Alibaba’s international business.

Cainiao has deployed overseas warehouse resources and also aggregated courier companies and logistics firms to provide better logistics services for cross-border eCommerce.

Alibaba Cloud has global cloud service capabilities, forming a basic infrastructure surrounding major global internet markets such as North America, Europe, Asia, and Australia, and providing underlying technical support for Alibaba’s international business.

Cainiao’s Global Footprint

Photo by Juliana Kozoski on Unsplash

Electronic World Trade Platform as the Global Stage and Launch Pad

In 2016, Alibaba called for the establishment of an electronic World Trade Platform (eWTP) to form a new cooperation platform for governments, private sector and enterprises to work together to provide a fair and healthy environment that fosters cross-border trade. With eWTP, small and medium-sized businesses will benefit from a lower barrier to trade and effectively making global buying and global selling an attainable reality.

Within eWTP, Cainiao provides logistics and customs clearance support spanning Asia, Africa and Europe. Cainiao has established eWTP strategic cooperation with six countries/cities namely Malaysia, Hangzhou, Rwanda, Belgium, Yiwu and Ethiopia.

EHubs Form a Hub and Spoke Network Globally

Essentially, eHubs provide warehousing and distribution center services within the platform. These are smart warehouses that leverage technology such as Internet of Things (IoT), robots and AI to digitalize operations.

The hub and spoke model would allow goods to be shipped from China to the regional eHubs which can then be distributed to the respective countries within the region. Throughout the logistics value chain, the digitalized process allows the seamless real-time tracking of the goods.

In addition, goods declaration can be done online to expedite customs clearance for shortened delivery times.

Cainiao’s plans to launch six regional eHubs in Kuala Lumpur, Hong Kong, Dubai, Hangzhou, Moscow and Liege, allowing a comprehensive global network covering Southeast Asia, the Middle East and Europe.

Digitalizing the Last Mile Network

Making Technology Accessible to All

In order to cope with increasing parcel volumes, last mile delivery needs to be modernized and digitalized.

Here, technology implementations in the form of e-shipping labels help to provide real-time tracking of parcels, Global Smart Delivery Platform by Cainiao facilitates the management of cross-border shipment and identification of anomalies, and IoT connects different logistics partners seamlessly on Cainiao’s platform and over 3 million courier personnel and many more.

In China, Cainiao has laid out a comprehensive network of smart community post stations called Cainiao Post. Over 60,000 post stations located within communities can leverage IoT and facial recognition for contactless delivery and pick-ups.

Cainiao’s courier delivery app — Cainiao Guoguo, also uses technology to connect a previously fragmented courier industry comprising over 20,000 courier companies and 3 million personnel. With Guoguo, there is now greater transparency and stability in delivery, along with greater cost savings and customer experience.

Nurturing Micro-Entrepreneurship and Creating Sustainable Job Opportunities

Capitalizing on Cainiao’s broader plans to create a nationwide network of community post stations across 100 cities, job opportunities were created to support aspiring entrepreneurs in setting up their very own Cainiao-branded Community Post stations. Aspiring entrepreneurs can benefit from a lower barrier of entry and ability to leverage Cainiao’s brand recognition to launch their first business. This has effectively spurred on community entrepreneurship in China as the country recovers from the impact of the pandemic.

Furthermore, based on China’s courier delivery volume of 63 billion in 2019, which balloons during large sale events such as Double 11, there are plenty of opportunities for Cainiao Post managers to play an essential role in the last mile delivery and maintain a sustainable income stream.

Localizing Cainiao’s Last Mile Playbook for Overseas Markets

Cainiao’s success in laying a comprehensive last mile network in China has effectively created a playbook for last mile digitalization. This playbook is now localized by working with local and regional partners to establish a similar network in other markets, with Cainiao providing the technical expertise such as the use of e-shipping labels and the Global Smart Delivery Platform for route management and job distribution.

This will help to unite disparate players and create a more standardized last mile delivery service to benefit businesses and consumers.

In Singapore, Cainiao has partnered with Singapore Post, BEST Inc, Roadbull and Park N Parcel to offer a range of last mile service offerings across 1,600 collection points, 600 couriers and 500 couriers island-wide.

The Journey is Just Beginning

In June, we announced plans to ramp up investment to expand our global logistics network and drive the digital transformation of the industry. By expanding chartered flights from 260 to 1,260 over the next nine months, doubling our warehouse network to span over 2 million sqm and partnering over 30 customs clearance facilities, we hope to achieve our commitment to deliver globally within 72 hours.

Over the next three years, increasing efforts will be made to lay a stronger foundation to support greater economic growth and cross-border trade. Our journey is just beginning as we strive to revolutionize the logistics industry.

The logistics arm of Alibaba Group. Follow us for content on smart logistics and supply chain management