It looks like March 2016 is a good time to be an Alibaba affiliate company.
Last week, it emerged that Ant Financial — which runs Alipay among other businesses — is raising a billion dollar financing round at a valuation of up to $60 billion. Now Cainiao, a three-year-old Alibaba-backed logistics firm, has confirmed its maiden external funding round from Temasek Holdings and GIC in Singapore, Malaysia’s Khazanah Nasional and China-based Primavera Capital.
The size of the deal is undisclosed and an Alibaba spokesperson declined to provide details when we asked, however financial news site Caixin reports [Google Translate] that it is upwards of 10 billion yuan ($1.54 billion) at a 50 billion yuan ($7.7 billion) valuation.
Alibaba is famous for being one of the world’s largest e-commerce companies and, among many feats, holding the largest U.S. IPO in history. But it also has a number of affiliate companies that cover related verticals and are not included in the parent company. Cainiao is logistics. It was founded in 2013 with the goal of creating a UPS-style backbone to enable deliveries across China and international markets while tapping into big-data and other technology to increase efficiency.
Today, it claims to have 128 warehouses and 180,000 express delivery stations in China, offering same day delivery in seven Chinese cities and next day delivery in a further 90. To give some idea of scale, Cainiao handled 278 million packages just from the 11/11 shopping sale in 2014 alone.
And this is just the start. Cainiao president Judy Tong told Freight Week last year that the company will spend $16 billion over the next five to eight years “to make it easy to deliver goods to anywhere.” That’s worldwide, not just China.
Cainiao was formed by a consortium of existing logistics players to give the project a running start with resources and customer bases. Alibaba itself took a 48 percent stake but it isn’t clear how the business of that is panning out. Since, as the New York Times points out, this (and other Alibaba investments in logistics and online-to-offline) are “opaque” since the retail giant isn’t required to disclose financial details.
Beyond handling packages from e-commerce sites and merchants, Cainiao covers everyday logistics too, with fresh groceries among its verticals. Tie-ins with retailers like Suning, which Alibaba invested $4.6 billion into last year, could help physical retailers improve their use of the web to grow their customer base and engagement.
Cainiao has flown under the media radar thus far — perhaps because logistics isn’t sexy to some? — but it is developing into a hugely important project for Alibaba since logistics are central to the success of Alibaba’s core e-commerce businesses. Alibaba’s services don’t hold inventory, which is where Cainiao’s delivery footprint can be complementary. Further, Cainiao’s efforts to build a global network are aligned with Alibaba’s own focus on growing its retail network outside of China.
Here’s more on Cainiao for those who appreciate cute videos:
Hat tip Barons
Featured Image: Pieter Beens/Shutterstock