HONG KONG (Reuters Breakingviews) - Alibaba’s delivery route is missing a few turns. The e-commerce titan is leading a $1.4 billion investment into China’s top courier service, ZTO Express. It’s the latest move in a scattershot approach to logistics and it isn’t clear how the pieces fit together into a cohesive strategy.
Shanghai-based ZTO will issue new shares, equivalent to about a 10 percent stake, to Alibaba, its logistics subsidiary Cainiao and other unnamed investors. For the $15 billion express-delivery outfit, the new funds will be a welcome boost as it attempts to fend off rivals and battles rising labour costs in a cutthroat industry. The backing of Jack Ma’s $500 billion shopping empire also could help with new initiatives such as international expansion and technology upgrades.
What Alibaba gets out of the deal is less straightforward. A senior executive from Cainiao, which acts as a network and technology provider for Chinese delivery firms, will join ZTO’s board. The two sides already have close ties, however. ZTO is a co-founder of Cainiao and relies on Alibaba for most of its customers.
The real motive could be for Alibaba to strengthen its hand against JD.com. Though valued at just a tenth as much as Ma’s behemoth, it has spent years building its own in-house delivery and warehouse network. Earlier this year, JD tapped outside backers, including Tencent, to invest $2.5 billion in its logistics subsidiary.
By comparison, Alibaba’s approach looks muddled. Last year, it spent $800 million to take control of Cainiao and pledged to invest $15 billion over the next five years to build up its network. The company also owns minority stakes in other peers, including two ZTO rivals and Singapore Post.
Ploughing more money into delivery, warehouses and the like suits Alibaba’s “New Retail” initiative of marrying bricks-and-mortar retail with e-commerce. At the same time, partnerships might work just as easily as ownership stakes. And whether any of these multiple transactions are a pre-cursor to a full takeover or combination is a big question mark. For now, investors are probably just lost.
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