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Here’s what you need to know today.

1. Cainiao now controls 81% of Alibaba’s domestic orders

Embedded within Alibaba’s most recent quarterly results was a clear sign that couriers in China have increasingly aligned their IT platforms with that of Alibaba’s logistics affiliate, Cainiao.

Hangzhou-based Cainiao operates a platform which integrates multi-modal transport suppliers and express couriers from every corner of the country in order to seamlessly deliver packages. This helps smooth the gaps in the courier’s service areas.

The average number of parcels moving through Cainiao’s network to be around 42 million packages per day.

Read the rest of the story here.

Want to read more on Cainiao? Check out eIQ’s series on the Chinese logistics giant here.

 

2. Singapore’s ongoing tech push: VR in schools, more fintech, and tech IPOs

Speaking at the Infocomm Media Business Exchange opening ceremony, Minister for Communications and Information Dr. Yaacob Ibrahim made a number of announcements that address problems such as tech companies that struggling when they prepare for an IPO, to education the next generation about tech.

The Minister said that IMDA, Singapore’s main IT and media regulator, will collaborate with the Singapore Exchange (SGX). IMDA’s accreditation service, which vets promising local startups and helps them attract external investment and exit opportunities, will work with the country’s stock exchange to “increase accessibility to capital markets for tech companies.”

The nation will also stress on 5G infrastructure deployment, which is meant to address every growing demand of internet-of things networks.

Dr. Ibrahim said the vision is to “nurture a digital society where all Singaporeans have access to technology, understand it, and benefit from using technology in their everyday lives.”

 Read the rest of the story here.

 

3. Amazon will open a bookstore in LA

Amazon is planning to open a bookstore in a Century City mall, its first brick-and-mortar bookstore in Los Angeles.

The online retailer, credited with causing a crisis in the physical bookselling industry, has opened five brick-and-mortar bookstores in the last 18 months and has announced plans for seven more.

Amazon Books stores are different from traditional bookstores in a number of ways. The Record newspaper of Northern New Jersey — where a future Amazon Books will be located — visited the Dedham store. It does not take cash or have price tags — instead, customers were encouraged to download the Amazon shopping app and scan merchandise with it.

Here’s what you should know today.

1. Alibaba backed ‘Best Logistics’ gears for IPO

Best Logistics, a Chinese logistics company backed by Alibaba Group Holding Ltd is gearing up to go public in the U.S., aiming to raise roughly $1 billion.

Best Logistics is hiring investment banks to help take it public with an IPO expected in September or October at the very earliest. Best Logistics had a market value of more than $3 billion last year after it was able to raise $760 million from a slew of new investors.

Alibaba’s Cainiao Network is also an investor in Best Logistics

The potential IPO of Best Logistics comes at a time when shipping competition is heating up in China as Amazon enters the market. According to a recent report in the Financial Times, Amazon is taking aim at the global logistics industry in China, which is valued at $8 billion.

Read the rest of the story here.

 

2. Facebook Messenger now supports group payments

The payments feature essentially works the same in group chats as in private ones, but now allows users to pay either everyone in the group or individual members through a click of the payments icon.

Facebook suggests the new feature would be useful for groups where everyone is chipping in on a purchases, like a group gift or are splitting a restaurant bill.

These are areas where people today still tend to turn to standalone payment services, like PayPal, Venmo, or Square Cash.

In addition to sending payments to other group members, you can also request payments from the group right within your chat. Currently, this feature is only available in the United States.

Read the rest of the story here.

 

3. Inc. doubles down on Southeast Asia

The company behind the website, Singapore-based Sycamore Media, has raised $1.2 million from local venture builder REAPRA.

Sycamore has licensed Inc. for Southeast Asia and plans to publish a print magazine as well, much like its US-based counterpart. The Tech in Asia rival will also branch out to events, kicking off with one in Manila at the end of April.

These initiatives involve continuing to build up traffic to the website, launching the print version around May, and exploring video content. Inc. Southeast Asia has about 750,000 unique visitors and around 1.4 million page views. No revenue numbers are disclosed.

Read the rest of the story here.

 

4. Recommended Reading: Uniqlo wants to be America’s perfect fit

The company’s perceived “wokeness” went up tenfold when Tadashi Yanai, president of Uniqlo’s parent company Fast Retailing, told Trump to “shove it.” Yanai was celebrated for coming back against the administration.

They’re products made for the average American, but aren’t necessarily bought by them. “It’s not that they don’t like us in the suburbs, it’s just they’re less familiar with us,” explains Fast Retailing’s president of global creative, John C. Jay.

Now, Uniqlo is focused on opening stores in big cities and hoping the people already familiar with it will hook up their friends in smaller ones.

Read the rest of the story here.

 

The global shipping industry is going through a tough time. Overcapacity and the lowest recorded freight and cargo rates are causing logistics companies to salvage the situation by diversifying their clientele, namely to serve more online players.

Alibaba is taking advantage of this opportunity and creating a solution for these companies through its OneTouch import and export service, offered by a company Alibaba acquired seven years ago. Chinese suppliers no longer need to go through freight forwarders and can directly book spots on a container ship directly via the internet through OneTouch.

The platform is a sign of growing harmony between logistics companies and ecommerce.

OneTouch has already helped over 20,000 merchants – SMEs and Alibaba’s B2B marketplace sellers – explore cross-border opportunities with China and handles the customs clearance and logistics.

Shipping companies happy to jump onboard

OneTouch was put into the spotlight after signing three big names in shipping; Maersk, CMA CGM and Zim.

“This gritty industry has taken the background role in the past but now has the potential to affect the way every product is sourced, bought and delivered,” comments Dr. Zvi Schreiber, CEO and founder of Freightos.

“Building on a massive 80% ecommerce market share in China, Alibaba’s new partnership with Maersk – which controls 25% of all container ships globally – means Chinese manufacturers and retailers have a direct line to US buyers, avoiding middleman markups. Maersk is testing the waters of digital sales with one of the world’s largest ecommerce companies while threatening forwarder business.”

Whatever you do, I do?

Alibaba’s OneTouch is similar to Beijing Century Joyo Courier Service, Amazon.com’s ocean freight service for Chinese “Fulfillment by Amazon” vendors, who market directly to foreign consumers by staging their goods at Amazon warehouses abroad.

“If you are a Chinese supplier, Amazon FBA lets you “slap a brand on your product, work with a logistics company, list your goods on Amazon, and now all of the sudden you cut out three layers of supply chain and you’re able to get directly to customers,” said Scott Galit, CEO of payment processing firm Payoneer, speaking to USA Today.

A big difference between the two is that OneTouch allows exporters to send their containers to the destination of the customer’s choice.

Why is Alibaba doing this?

Panjiva, an online search engine with information on global suppliers and manufacturers, detailed in research that the market opportunity for partnerships with OneTouch is significant.

Data shows that from China-to-US, less-than-container load (LCL) shipments in 2016 totaled to 699,000. LCL refers to when a shipper does not have enough goods to fill into a container, they would arrange for a consolidator to book their cargo.

Xiao Feng, Vice General Manager of OneTouch comments,

“Our goal is to help small and midsized companies export as easily as big companies do.”

“Alibaba unites small businesses online to increase their bargaining power with suppliers. For example, there’s a big difference in the price paid by a company that often ships 100 containers of products compared with a company that usually only ships one container.”

But it’s probably Dr. Zvi Schreiber who puts it best.

“For Alibaba, this is a direct challenge to global retailers like Amazon. Beyond drones and futuristic supermarkets, Amazon opted to get licensed as a forwarder (NVOCC). Alibaba one-upped them by going directly to the world’s largest ocean liner. Point, Alibaba.”

Interested in Alibaba’s plan to dominate logistics? Read about Cainiao Network here.

Here’s what you should know.

1. Supermarket giant Walmart now owns 12% of China’s JD 

Walmart first took a 5 percent stake in JD mid-2016, but has since quietly upped the ante in China’s online shopping battle by acquiring more of the Alibaba arch-rival. Walmart’s JD stake is now worth US$5 billion.

Rising on the back of China’s ongoing ecommerce boom, JD has seen its valuation rise nearly 60% since its 2014 IPO in the US.

Read the rest of the story here.

 

2. iFashion Group buys Singaporean lifestyle brand Megafash for $2.5m

Megafash specializes in showcasing smaller, independent brands through a combination of online retail and physical stores. The startup has been operating in Singapore, Indonesia, and Thailand. After the acquisition, it will continue under its own brand.

Megafash co-founder Jeremy Khoo joins iFashion as CEO.

Read the rest of the story here.

 

3. Recommended Reading: A virtual empire

Chinese giant Alibaba Group Holdings is gearing up to bridge online shopping with physical shopping through VR and AR.

“We want to create a new economy where the online world is integrated with the physical world,” said Jack Ma. “We’re building an economic entity, a virtual economy on the internet.”

The company has also begun to use technology for logistics.

“We’ve used technology to make a smart fulfillment network through 163 warehouses and 140,000 routes. Our data analytics can be used to analyse the shortest routes and help merchants manage their inventories,” said Judy Tong, chief executive of Cainiao Network, Alibaba’s logistics arm.

Read the rest of the story here.

Here are today’s top headlines.

1. TMB partners with Alibaba to boost Thai SME growth in ecommerce

What? Thailand’s TMB Bank has partnered with Alibaba Group and web building platform Ready Planet to boost SME growth in ecommerce.

How? SMEs with a ‘gold supplier’ membership on Alibaba.com through Ready Planet will receive special privileges such as special money conversion rates and free money transfers. They will also have access to TMB’s training program, ‘SME Trade Expert Program’, with the chance of getting free ad space on Alibaba.com’s home page.

The bank estimates that there will be 300-500 clients that sign up for the program.

Read the rest of the story (in Thai) here

 

2. Venture lending firm InnoVen extends loans to two startups in Southeast Asia

What? Venture lending firm InnoVen Capital announced today it has extended loans to stock image database 123RF and digital media services provider Conversant Solutions.

What is venture debt? A type of debt financing provided to venture backed companies by specialized banks or non-bank lenders to finance working capital/expenses.

It is essentially type of loan that can be used by a company to carry it over a particular threshold between venture capital fundraises or to purchase necessary equipment.

What is the benefit? “Venture debt allows us to keep our equity – it is a cheaper form of financing.” Said Andy Sitt, founder of 123RF, InnoVen’s latest client states.

Read the rest of the story here.

 

3. Recommended Reading: China’s ecommerce gold rush is on, and the deliverymen dig in

According to a write-up in Financial Times, what China’s logistics sector lacks in glamour it makes up for in sheer heft. The mainland industry is worth some $2.2tn, out of $9tn globally, according to logistics consultancy Armstrong & Associates.

 Leading that rush is Cainiao, the tech-driven logistics network in which ecommerce giant Alibaba holds a 47% stake. Cainiao has assembled a network of 15-16 of the biggest delivery companies and built a data platform that enables speedier and more efficient service by letting couriers bundle deliveries in the same area.

Source: Financial Times, 31st Jan, 2017

Read the rest of the story here

For more reading on Cainiao, download eIQ’s report on the logistics giant here.

This is the last of a four-part series breaking down Alibaba’s plan to shake up logistics in China: Cainiao Network. PART 1, PART 2, PART 3

Cainiao’s Platform Model Versus Jingdong’s Direct Model

By analyzing the aforementioned five pillars of Cainiao Network, we find that the implementation of its strategies cannot be achieved without collaboration with other partners such as warehouse storage operations. This reveals Cainiao Network’s business model implementation approach: a data-driven “platform model” (i.e. decentralized, horizontally integrated, asset-light).

Clearly, the platform model advocated by Cainiao Network is very different from the “direct model” (i.e. centralized, vertically integrated, asset-heavy) represented by Jingdong and SF Express and represents a different logistics development approach.

But it’s not a simple comparison – whichever fits a company’s own needs at any given stage is the most appropriate approach.

The advantage of the direct model of Jingdong lies in the high degree of control and better experience it can bring. As long as ecommerce logistics has massive demand reflected in warehousing and distribution, Cainiao’s platform model can achieve rapid growth.

In Cainiao Network’s view, the platform model is the inevitable future of logistics. Cainiao’s president Tong Wenhong believes that the direct model has no future and “Jingdong will eventually use Alibaba’s model in the future” on the grounds that Jingdong needs seventy to eighty thousand logistics personnel to process a daily parcel volume of one million and SF Express needs close to 400,000 logistics staff to handle a daily capacity of 4 million parcels.

When the number of China’s packages reaches 200 million, how many logistics staff will be needed to deliver them? The director of strategic cooperation at Cainiao Network, Li Wei, has said that “in the pyramid-shaped management structure of the direct model, each layer added will result in additional management costs of about 30% being passed along.”

The direct model ensures better service and timeliness, but it cannot solve the problem of scale. Cainiao hopes to help logistics companies through a platform approach with the goal of improving service and timeliness through technical means rather than brute (human) force.

Cainiao’s Platform Model Has its Skeptics—SF Express

Although Cainiao is very confident about its own platform model, its partners are not and some are even rejecting it. When Cainiao Network was established, it claimed bring innovation to the express delivery industry using a cloud system and warehousing storage system.

Two years later, these original strategies became the previously highlighted five key strategies: the express delivery strategy, the warehousing and distribution strategy, the pickup stations strategy, the cross-border logistics strategy and the rural logistics strategy.

The first three strategies almost closely control the operating lifeline of courier companies: that is, they intervene in terms of data, control delivery routes, and seize the last-mile. Needless to say, it will cause resistance by courier companies.

Take SF Express as an example. Even though SF Express and the “Three TOs and One Da” were all 1% stakeholders when Cainiao was established in 2013, they have expressed disagreements regarding their position with respect to Cainiao.

During the “Cainiao Jianghu Assembly”, more than 10 representative courier companies led by the “Three TOs and One Da” appeared to support Alibaba; only SF Express was absent. When facing the matter of business alliances, the strategies of the “Three TOs and One Da” are completely different from that of SF Express.

“The Three TOs and One Da” have difficulty coming to a resolution, while SF Express wants to get rid of the control of Cainiao Network platform and its ambition to be independent is abundantly clear. To show you why, let’s look at a simple comparison of SF Express and Cainiao Network.

cainiao business-model

Through the above comparative analysis, SF has been keeping an alert and sober eye on Cainiao for some time, and it has even tried to “challenge” Alibaba. The “Three TOs and One Da”, on the other hand, have been strategically ambiguous.

At present, it is hard to say who will win and who will lose—this is a long-distance race, and at this moment, the competition is more about who has made the best preparations for the future.

Conclusion

This three part series aimed to systematically review and analyze the commercial trajectory and development of Cainiao Network over the past two years since its establishment in 2013.

It also focuses on Cainiao Network’s strategic positioning to complete Alibaba’s own business ecosystem, and points out the five current strategic directions and implementation approaches of Cainiao Network. The main conclusions are as follows:

  1. Consumers have long complained about poor logistics in China. With the growth of the direct logistics approach of Jingdong, Alibaba’s logistics business has been at a greater and greater competitive disadvantage. This is the real reason why Cainiao has doubled-down building its own warehouses.
  1. Compared with the ecommerce and financial services business that Alibaba has successfully launched before, Cainiao’s current efforts involve many offline courier and logistics issues.

The complexity involved in completing the full integration of online and offline is beyond imagination – no precedent outside of China can be referred to. Also, Cainiao’s partners are cautious and alert and have their own contingency plans. Therefore, it is difficult to say whether Cainiao’s platform approach will be successful in the future.

Implications For Logistics in Southeast Asia

As Alibaba may have noticed, Southeast Asia shares a lot of similarities with China a decade ago, especially in terms of a nascent and fragmented logistics ecosystem.

Because of the pain points in logistics, plenty of investor funding has gone into this space. Companies like Ninja Van, Deliveree and the now-defunct Zyllem have raised millions to tackle the last-mile challenge in SEA – even Lazada invested in its own delivery fleet as part of Lazada Express (LEX).

In this kind of environment, introducing a platform like Cainiao would make a lot of sense. A central platform with large address database and route optimization would improve the efficiency of logistics in the region.

On the other hand, it could also spell bad news for last-mile delivery companies in the region because Cainiao would end up controlling the supply of packages, the data, the rules, and potentially turn last-mile logistics into a price-driven, commodity play.

Alibaba was able to get Cainiao off the ground due to the massive order volume from Tmall and Taobao combined. In SEA, there’s no single dominant player who commands the bulk of all orders making Alibaba’s acquisition of Lazada a likely first step towards introducing Cainiao. As we’ve seen with Alipay and Ant Finance, Cainiao in Southeast Asia may not be a matter of “if” but rather “when”.

The original first appeared in Chinese on Yunbao88. Concluding excerpt by Sheji Ho, editing by ecommerceIQ team.