Date
24 November 2017
Alibaba, which is controlled byJack Ma (pictured here), and SF Express have agreed to settle a business row, but it may not be the end of the matter. Photo: Bloomberg
Alibaba, which is controlled byJack Ma (pictured here), and SF Express have agreed to settle a business row, but it may not be the end of the matter. Photo: Bloomberg

Alibaba-SF spat: Why Jack Ma should be worried

Imagine a scenario where Amazon orders its retail partners to snub UPS and instead courier their goods only through logistics firms that fall at the feet of Jeff Bezos, the e-commerce giant’s boss. How will the market and the US government agencies react?

Well, for starters, the US Department of Commerce will probably launch an anti-trust probe to see if Amazon is abusing its dominance to browbeat an industry-support player. 

Next, the Federal Trade Commission and the Department of Justice would also join hands and look into the matter for any irregularities and if any legal or disciplinary action is warranted on the tech behemoth.

Bezos and his Amazon empire would be courting troubles, for sure, if they seek to ride roughshod over a partner which may want to do business its own way and not succumb to bullying or unreasonable demands.

Now, compare this hypothetical situation with what actually happened in China recently in a case involving Alibaba and its chief, Jack Ma, and parcel delivery firm SF Express. 

Alibaba had blacklisted SF following a data-sharing row, causing a crisis for the logistics player, but e-commerce giant was able to get away with nary a rap on the knuckle from Chinese authorities. 

Tensions erupted between Cainiao, an Alibaba affiliate, and SF earlier this month after the former reportedly demanded that SF share information on all its deliveries, including those that did not originate from Alibaba.

SF, which processes more parcels than any other delivery firm in China with an army of 120,000 deliverymen and a fleet of 40 cargo jets, rejected the request, citing customer privacy rules. 

Surprised and angered that its request was rebuffed, Ma ordered Cainiao to remove SF from its list of service providers and also told merchants to select alternate courier firms, reports have said.

The standoff came to an end only after an intervention from China’s State Post Bureau. Cainiao and SF have agreed to resume data sharing, yet it’s unlikely that ties will get back to normal.

Ma may have thought that his strong-arm tit-for-tat approach will teach SF a lesson, given that the huge business from Alibaba, with tens of thousands of parcels shipped out daily, is something that the latter can’t afford to lose.

But as SF was penalized, Ma left himself open to criticism that he may have sacrificed the interests of consumers and the numerous vendors on its Taobao online mall.  

The drama, meanwhile, prompted netizens to raise another, perhaps more important, issue. Why did mainland authorities not take action promptly on the matter? 

For several days not a single government agency responded even as concerns began to simmer among consumers.

Overall, watchdogs have not covered themselves with glory in the way they handled the matter.

Ma’s hirelings

Alibaba never found the idea of delivering goods itself appealing, prompting it to bring in many logistics firms into its e-commerce ecosystem.

It launched the Cainiao alliance in 2013, promising users that they will be able to send, receive and track packages across all platforms with ease, no matter which delivery firm they choose.

But as the high-profile spat with SF has revealed, it’s never as simple as that.

As most leading courier firms have come under the Cainiao umbrella, they are required to stick to Alibaba and obey whatever they’re told.

Only if they behave, will they be rewarded with more parcels from Alibaba’s online platforms.

As for consumers, they are now startled as they realize that with Cainiao, they may not have the desired level of privacy with regard to personal information and consumption habits.

If you are a fan of online purchases, the e-commerce giant may know everything about you — what you buy, how often you buy, the amount you pay, your address and a whole plethora of other data, even if you shop at a competing website or have never registered at Alibaba’s platforms.

If you have used any of the couriers under the Cainiao umbrella, data could be passed onto Alibaba.

SF has been the last fortress standing in the way after Ma almost single-handedly grabbed a stranglehold of China’s delivery market. A thorn in Ma’s flesh, SF had been steadfast in not bowing to the demands of data sharing for non-Alibaba parcels.

One consequence of the latest standoff which Alibaba will find disconcerting is that it has helped unite all of Alibaba’s online rivals.

Amid the outcry from merchants and consumers, Tencent, JD.com, NetEase and other players in the cyber-marketplace have swiftly sided with SF and enjoyed taking potshots at their common rival, accusing it of “vile, anti-competitive plotting”.

There have also been cracks in the Cainiao alliance, as Ma has begun using the stick to make the logistics partners fall into line. According to reports, some key members have been thinking of forming a separate alliance of their own to ensure better collective bargaining power with Alibaba.

At a time when Alibaba has enough problems, with financial institutions aggrieved by the e-commerce titan’s payments system Alipay and deposit-absorbing online investment fund Yuebao, and tax authorities grinding their teeth about lost revenues and finding ways to tax e-vendors, has Ma just made more enemies for himself?

- Contact us at english@hkej.com

FC/RC

Read more:

Boost or bust? State agency questions Alibaba model

 

SF delivers more parcels than any other courier in China, with an army of 120,000 deliverymen and a fleet of 40 jets. Photo: Bloomberg


A file picture shows Jack Ma at the 2013 launch ceremony of Cainiao logistics alliance. Ma said Alibaba will never deliver goods on its own. Photo: Alibaba


EJ Insight writer

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