Alibaba Sets Amazon in Its Sights With Low Cost Global Delivery

Will Alibaba's move spark a package price war?
Capitalwatch StaffMay 14,2020,06:55

Global delivery services will be moving more than just Amazon packages. Alibaba’s logistics network is reaching overseas with highly competitive prices.

The Chinese e-commerce giant’s Cainiao Smart Logistics Network is forging a deal with For Perfect X-border to deliver from China globally at low cost. Yicai Global reported the cost will be just over 200 yuan – or $29 – per kilogram for a parcel sent to the United States via Cainiao Guoguo. That’s less than half the price of a DHL express delivery.

Cainiao was co-founded by Alibaba in 2013 and today is one of the largest and technology-powerful logistics services in China. In November, Alibaba upped its stake in the company from 51% to 63% with a 23.3 billion yuan investment. The conglomerate also holds stakes in Chinese logistics companies ZTO Express (NYSE: ZTO), STO Express (SHE: 2468), YTO Express (SHA: 600233), and BEST Inc. (NYSE: BEST). Recently, Alibaba also acquired a 2% stake in Yunda Holdings (SHE: 2120).

China’s – and the world’s – logistics market is a hot one, especially amid the Covid-19 outbreak and the related shift in consumer behavior. Alibaba’s shopping platforms Tmall and Taobao, as well as rivaling (Nasdaq: JD), are highly dependent on quick pick-up and delivery, and intense competition has led to tech progress in the sector. At the industry summit in Hangzhou in May 2019, Alibaba’s then-CEO and now also its chairman, Daniel Zhang, stressed the importance of digitization.

“Digitizing parcels is not enough,” he said at the time. “We are working with partners to digitize warehouses, equipment, transportation vehicles [and] warehouse pickers’ handheld devices,” Zhang said, as cited by corporate news medium Alizila.

The medium also said, “Cainiao aims to connect 100 million smart devices to its IoT technologies in three years, including its connected devices, warehouse and delivery robots and algorithm-backed management systems.”

Shares in FedEx Corp. (NYSE: FDX) were trading 3.4% lower in the afternoon, at $109.30 apiece. United Parcel Service (NYSE: UPS) was trading 2% lower by midday, at $90.94. Frankfurt-listed DHL stock (DPW) also slipped 2% on Wednesday, to 26.97 euros per share.

The stock in Alibaba (NYSE: BABA) traded in the green early,  but slipped into red territory in the afternoon, trading at $198.51 per American depositary share, down about 1% as of midday. 

Other delivery companies have made news this week as the U.S. begins to reopen the economy.  Hive Box, which operates as China's largest locker delivery, decided to charge users for storing parcels for more than 12 hours (a change from the prior 24-hour wait). In response, some communities boycotted the service, as Caixin Global reported. 

A number of other companies, including some listed above, are raising their prices as a result of reinstated toll fees.