Alibaba ropes in China Post to beef up delivery in lower-tier cities

Chinese e-commerce giant signs agreement with the state-run postal service in a bid to boost its logistics network in China's lower-tier cities. The deal will allow each partner access to the other's warehouses and processing centers.

Alibaba Group has signed a new agreement with China Post Group in a bid to beef up its delivery network in the country's lower-tier cities. 

The world's largest postal network, state-run China Post will jointly develop new business and markets by collaboration in logistics, e-commerce, finance, and data security, reported China Daily on Friday. Both companies will provide access to each other's warehouses, processing centers, and delivery resources, as they look to expand their e-commerce logistics network to serve third-party couriers in the country. 

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China Post has 100,000 service points across China, including in first-tier cities and rural villages, and offers delivery and pickup services for online merchants and shoppers that need access in remote areas. 

Speaking at the signing ceremony in Beijing, Alibaba Chairman Jack Ma said: "China will see the emergence of online platforms that can handle transactions of more than 10 trillion yuan ($1.63 trillion) a year. We need to make sure the development of a logistics system in China can support the surging development of e-commerce." Ma described the country's tier-3 and tier-4 cities and rural areas to have "unimaginable growth potential".

Citing an analyst from Analys International, Lin Wenbin, the China Daily report noted that the China Post deal was aligned to Alibaba's target of growing its footprint in lower-tier cities. Lin said tier-3 and tier-4 cities offered greater e-commerce potential as they typically lack business infrastructure such as shopping malls. 

"Moreover, people there have less pressure from high housing prices and tight work schedules compared with those who live in mega-cities in China, so the consumption power in lower-tier cites cannot be underestimated," he said, noting that China Post operates the most delivery networks in lower-tier cities, especially villages.

Alibaba has been making investments across the region to boost its logistics network. Just last month, the Chinese e-commerce giant agreed to fork out S$312.5 million (US$248.88 million) for a 10.35 percent stake in Singapore's postal service, SingPost . The partnership would allow priority to be given to SingPost's logistics services and provide Alibaba access to the Singapore postal service provider's global logistics network, both companies said, adding that they were also assessing the possibility of setting up a new joint venture related to global e-commerce logistics. 

Alibaba last year  delivered an estimated 5 billion packages from its e-commerce marketplaces including and Tmall, and processes an average of 11.3 billion orders annually from 231 million active buyers.