On 28 June, Cainiao Smart Logistics Network,  Alibaba’s logistics affiliate, announced that it would actually start a … delivery business. 

CEO Wan Lin announced the creation of Cainiao Express, a domestic express delivery service in China, at the company’s annual Global Smart Logistics Summit (GSLS 2023)in Hangzhou. 

You might think – wait a minute, isn’t Cainiao already a logistics company? 

Well, Cainiao has been a “smart logistics network”, which means it creates the system, data, warehouses and other infrastructure allowing ecommerce companies to be effectively dispatching orders to express delivery companies. 

Compared to rival JD, which handles delivery on its own, Alibaba has been cautious, preferring to take stakes in multiple express delivery companies while retaining the core infrastructure, especially data. 

As shown in our recent piece J&T Express: Highlights of draft IPO prospectus, there are at least seven major express delivery companies in China, with Alibaba investing into four of them (STO Express, YT Express, Yunda Express and ZTO Express): 

However, the debate of whether Alibaba’s relatively asset light approach allows full control of its ecommerce logistics (i.e. cost & customer experience) has been going on. Cainiao itself has attempted to run its own delivery services at a smaller scale before. 

Judging from the value proposition of “Quality Express, Good and not Expensive” announced at the conference, Cainiao Express seems to be focusing on the premium market, where JD and (in a differentiated way) SF Express operate. 

To understand why Cainiao makes such a launch now, it is worth looking at the bigger picture. In the recent restructuring of Alibaba Group, Cainiao became one of the six independent group companies. 

That raises a few prospects: 

  1. Cainiao will pursue its own IPO, and therefore be responsible for its own prospects (rather than Alibaba platforms feeding it orders); 
  2. Alibaba’s ecommerce businesses (including Taobao/Tmall Group and global businesses such as Lazada) might be able to choose other partners to work with instead of Cainiao. 

Either way, Cainiao needs to show its long term strategic value. The purpose of launching its own express service is unlikely to weaken other express providers that Alibaba (or Cainiao) has a stake in, but to give Cainiao itself a strategic leverage to defend its moat. 

At the same conference, Cainiao also announced increased service levels for Alibaba’s cross border platform AliExpress – five working days worldwide. This improvement is of course in the context of Alibaba’s rival PDD Holdings grabbing the cross border ecommerce market share through its Temu subsidiary

Alibaba’s co-founder Joe Tsai, who will soon take over as Alibaba Group Chairman, has also recently been named as Chairman of Cainiao Group. He said in a speech via video link that ““Alibaba Group will always firmly support the long-term development of Cainiao”. 

At the GSLS 2023 event, Cainiao Express signed agreements with brands such as Tsingtao Beer and Aupres, with representatives present from Alibaba companies including Intime department store, Hema and Tmall Supermarket.  

Taobao and Tmall might not ditch Cainiao any time soon, after all. 

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].