Alibaba Group Holding Limited (NYSE: BABA) and its logistic arm Cainiao Network have led a strategic investment of US$1.38 billion in Chinese express delivery company ZTO Express, in exchange for an approximately 10% stake in the company.
The investment is the latest in Alibaba’s continued effort to strengthen its logistics capabilities. The transaction, expected to close in early June, will deepen Cainiao and ZTO’s collaboration in building up pickup and delivery capabilities, warehouse management, cross-border logistics, according to a joint announcement just released today.
"ZTO has been an important partner to Alibaba Group and Cainiao Network in the development of the new digital economy," said Daniel Zhang, CEO of Alibaba Group and chairman of Cainiao Network. "The continuing expansion of New Retail is catalyzing new opportunities and demands in logistics. This strategic investment will strengthen synergies across our mutual businesses to create new value and improved experience for merchants and consumers."
Cainiao and ZTO will jointly development digitized solutions in express deliveries, which could include bringing the pickup and delivery process online and adding smart technologies to improve operation efficiency.
Currently, some express delivery services including China’s largest such company SF Express only allow senders of packages to fill up information online. Package tracking, signature and customer services are mostly conducted online as well. Artificial intelligence technology can also improve courier dispatch and route planning. Cainiao currently does e-shipping labels and smart sorting.
Best Inc., another Chinese express delivery company backed by Alibaba, raised US$450 million in September 2017 in a listing in New York. Around the same time, Alibaba also made an additional investment of RMB5.3 billion (US$807 million) to increase its ownership of Cainiao Network to become the controlling shareholder of the logistics platform.
Cainiao and SB China Venture Capital (SBCVC) led a RMB200 million (US$29 million) series B round in Flahshold, a Shanghai-based logistic robotics company in March 2017, as part of Alibaba’s plans to improve express delivery processes.