Chinese online retailer Alibaba Group Holding Ltd (BABA) along with its logistics partner Cainiao Network is planning to acquire a 10% stake in Shanghai-based express delivery firm ZTO Express Inc. (ZTO) for an investment of around $1.4 billion. This investment is an attempt to strengthen logistics and delivery capabilities which are becoming increasingly important for e-commerce companies. The deal will mostly close in early June.
Retailers are looking to achieve the right combination of online and offline presence in their businesses and are making the necessary investments for this purpose. Alibaba is looking to do the same through its new retail concept which aims at bringing together online and brick-and-mortar capabilities to maximize gain. The investment in ZTO is expected to benefit all three companies significantly.
Alibaba plans to invest more than $15 billion in logistics and delivery capabilities over the coming five years
Alibaba, which does not own a delivery service, has plans to invest more than $15 billion in logistics and delivery capabilities over the coming five years. The online retailer has stressed on the importance of customer service multiple times and is trying its best to improve on this area in every way it can. Improving delivery time is an integral part of this effort.
This investment will also help Alibaba gain some strength against its largest competitor JD.com which not only owns a delivery fleet but is also experimenting with new and innovative ways of delivery similar to the efforts being made by US e-commerce giant Amazon (AMZN). Alibaba ended up losing a bit of market share to its rival, and the company would definitely be looking to nip this unfavorable trend in the bud. The ZTO investment is likely to prove beneficial in this aspect.
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