Alibaba doubles stake in Chinese courier in bid to fend off PDD
Ecommerce giant pays nearly $1bn to boost holding in YTO as it tries to speed up delivery
Alibaba is stepping up efforts to tighten control over its logistics network to fend off stiffening competition in its core ecommerce business, paying nearly $1bn to double its stake in Chinese courier group YTO Express.
Hangzhou-based Alibaba remains China’s largest ecommerce platform, but has reported slowing growth for its Taobao and Tmall marketplaces even as competitors such as JD.com have experienced a pandemic-driven boost.
A particular challenge for Alibaba is its reliance on partners to ferry its 29.5bn annual packages to shoppers. During China’s lockdown early this year as authorities sought to curb the spread of coronavirus, that meant many of its goods went undelivered by courier companies lacking manpower.
Alibaba, like Amazon, has been moving to establish its own delivery platform to achieve a goal of delivery anywhere in China within 24 hours. The Chinese company also aims to be capable of reaching anywhere in the world in three days.
It has acquired stakes in five of China’s leading courier companies in recent years while building out a network of warehouses and parcel lockers to speed up delivery, and holds board seats on several of them.
It has also increased its holdings in logistics arm Cainiao to a controlling stake, and pledged to spend Rmb100bn ($14.6bn) in the five years to 2022 to beef up its operations.
Faster delivery would give Alibaba an edge over fast-rising competitor Pinduoduo, which is quickly gaining users attracted by its cheaper prices. Both ecommerce companies rely largely on the same set of courier groups to ship packages.
In contrast, JD.com has built out its own logistics network that allows for same-day or next-day delivery in many major cities across China.
Alibaba is paying Rmb6.6bn to increase its 10.5 per cent stake in YTO Express to 22.5 per cent. YTO’s founding couple, Zhang Xiaojuan and Yu Huijiao, will remain its controlling shareholders.
The aim, said Li Chengdong at ecommerce think-tank Haitun, was to expand its influence over strategy and planning. With its current small stake in YTO, Alibaba’s “control over the company was too weak to influence the company’s decision-making,” said Mr Li.
Alibaba said the deal would strengthen its YTO partnership “focused on digitisation and globalisation”.
Shanghai-listed YTO, which has a market value of about Rmb56bn, said the two companies would push forward with co-operation on logistics, air cargo, and international expansion.