Prediction Nine within our 2016 Predictions for Industry and Global Supply Chains (Available for complementary downloading in our Supply Chain Matters Research Center) predicts that online customer fulfillment providers Alibaba and Amazon, by virtue of playing the role of industry disruptor, will expand their presence in direct customer logistics fulfillment. Of late, we have featured a number of commentaries pointing to evidence that Amazon has initiated efforts to be its own air cargo provider as well as efforts focused in last-mile logistics fulfillment. We would be remiss without amplifying efforts related to China based Alibaba.
This week, Tech blog Tech Crunch featured a posting concerning Cainiao, the noted under the radar logistics fulfillment arm of Alibaba, specifically efforts to secure new external funding to expand its logistics capabilities. Alibaba itself has a business model that does not include holding inventory, and that is where its logistics arm provides such capabilities. Specifically, while any details of the funding have not been publically disclosed, Tech Crunch indicates the external funding round involved four Asia based investment firms and further cites Caixin, an Asia financial news site as indicating an estimated funding round of upwards of 10 billion yuan or $1.54 billion. Alibaba has already recorded the largest U.S. IPO in history, and its current reported $7.7 billion valuation provided leverage for Cainiao to secure funding. Reuters reported that is Cainiao’s first funding round since Alibaba founded it three years ago. Bloomberg in-turn reported that the company is angling toward a public offering to bankroll its expansion, envisioning the ability to support daily package deliveries of 200 million.
What should be of more interest is the context of a cited interview among Cainiao President and Freight Week last year indicating a long-term plan to invest $16 billion over the next 5-8 years to deliver goods not only in China but also worldwide. Tech Crunch observes: “Further, Cainiao’s efforts to build a global network are aligned with Alibaba’s own focus on growing its retail network outside of China.”
Obviously, upwards of $1.54 billion in financial resources can provide the means for for a lot of additional logistics and fulfillment capability investments as well as strategic partnerships with other global transportation and logistics players. China is a huge country with significant logistics challenges needing to be overcome but Cainiao has already proven that it can meet a significant fulfillment surge as witnessed by last year’s Singles Day holiday fulfillment event across China. Thus, Supply Chain Matters anticipates that some of Cainiao’s investments will emphasize broader global logistics support.
There have also been multiple media reports indicating that Alibaba itself is seeking $3-$4 billion in additional funding from external Asia based and other banks to fund further expansion of operations.
Couple Alibaba and Cainiao investment resources with Amazon’s ongoing efforts as transportation and logistics industry disruptor and our prediction has already taken on significance. As we declared, the industry dynamics of B2C online customer fulfillment are about to change.