E-commerce titan Alibaba’s logistics unit Cainiao has been in a standoff with the number one courier SF Holding Co. (002352.CN) recently.
Both companies have agreed to resume co-operation and data sharing after China’s State Post Bureau intervened. But the fight may not end just like that because there is too much at stake.
The standoff began on Thursday, with SF Express refusing to provide data required by Cainiao for increased security verification, claiming these data did not originate from Taobao.
Cainiao hit back, accusing SF of excessively using its Taobao customers data. It also removed SF Express as a shipping option and advised merchants to select alternative delivery methods.
However, the spat ended after the State Post Bureau stepped in. Cainiao and SF Express have swiftly resumed business co-operation and data sharing.
Alibaba founder Jack Ma established Cainiao four years ago together with department store chain Intime Retail Group Co. and industrial conglomerate Fosun International Ltd.
Alibaba owns a 43 percent stake while Intime and Fosun holds 32 percent and 10 percent shares, respectively. Five Chinese couriers including SF Express, YTO Express, STO Express, ZTO Express, Yunda Express all have 1 percent stake each.
Cainiao does not provide courier services at all. It’s a big data platform which collects information regarding on-line orders and activities of major logistics providers. It then combines these data to optimize delivery arrangements.
This platform of national scale is also supposed to predict delivery demand at different locations and coordinate warehousing activities accordingly.
Ma stressed that the platform was aimed at boosting delivery efficiency in the whole country in order to cope with China’s spiking parcel delivery needs.
Ma has predicted China will need to handle 1 billion parcels a day in 2025, up from 30 million in 2013.
Over the years, Cainiao has built a huge database covering the nation’s online shoppers and couriers. It has started to issue unified online order for couriers, and will start to allocate orders to its couriers in the future.
Starting out as a platform to facilitate order sharing, Cainiao gradually emerged as a platform that controls the order flow of couriers. It is quite foreseeable that couriers will have less bargaining power going forward and they probably have no choice but to use more Alibaba services like its cloud and on-line payment tools.
While most couriers are not in a position to vie with Alibaba, SF Express, being the largest, may not want to succumb so easily.
It is said that Tencent and JD, two of Alibaba’s rivals, quickly voiced their support for SF Express after the standoff broke out.
No matter how things develop, Cainiao’s dominance is hard to reverse, and this unit could become another crown jewel of the Alibaba group, in addition to Taobao and Ant Financial Services.
This article appeared in the Hong Kong Economic Journal on June 5
Translation by Julie Zhu
[Chinese version 中文版]
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