Alibaba takes control of logistic business for $807M

Chinese e-commerce giant forks out US$807 million for a 51 percent stake in Cainiao Smart Logistics Network and another US$15.2 billion over five years to boost its global logistics network.

Alibaba Group says it is setting aside US$15.2 billion (100 billion yuan) over five years to boost its global logistics network, as it pushes ahead with its "new retail" strategy.

It also was investing another US$807 million (5.3 billion yuan) to assume a controlling 51 percent stake in Cainiao Smart Logistics, a logistics firm it set up in May 2013 with other investors. This would increase its share from a previous 47 percent and provide an additional seat on Cainiao's board of directors, giving Alibaba four out of seven seats at the table.

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The transaction was expected to be finalised next month, subject to regulatory approvals, and would see Cainiao folded under Alibaba's core commerce business unit.

With the five-year US$15.2 billion investment boost in its logistics capabilities, the Chinese e-commerce giant aimed fulfil online orders within 24 hours in China, and within 72 hours anywhere across the globe.

It added that the funds would go towards research and development in logistics data technology and the development of smart warehousing, smart delivery, and global logistics infrastructure.

Alibaba CEO Daniel Zhang said: "By enhancing the logistics capabilities within the Alibaba ecosystem and extending our investment in this sector, we are further enabling our new retail strategy to bring online and offline retail into one seamless experience for shoppers. We will also continue to deepen our collaboration with various logistics partners to achieve this goal."

The Chinese company also operated a network of 13 physical retail stores across China, which it touted to be integrated with its online infrastructure to drive its "new retail" vision. This, it said, would "reinvent" traditional supermarkets by marrying online and offline experiences.

Apart from serving as retail outlets, Alibaba's Hema physical stores also operated as fulfilment sites for customer orders placed through its mobile app. On-site employees would scan and pick up items listed in each order and prep them for delivery. Each store served a radius of 3 kilometres, making deliveries within 30 minutes of the order.

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