Once hailed by growth investors, Alibaba Group’s shining star has dulled as growth rates hit record lows. In a bid to reignite momentum, Alibaba has decentralized its operations, granting individual business units the freedom to carve their paths forward.
Amidst this restructuring, the spotlight falls on Cainiao, a business unit with substantial promise and potential. Here’s a closer look at the logistics powerhouse in the making.
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The Quiet Global Force: Cainiao’s Transformative Journey
While Alibaba’s e-commerce dominance is widely acknowledged, its prowess in the logistics sphere often flies under the radar. Established in 2013 to meet the logistical demands of its parent company’s e-commerce arm, Cainiao has transcended its initial role to encompass a wide range of logistical services.
Besides simplifying omnichannel supply chain complexities for brands and merchants in China, Cainiao operates an extensive national express delivery network, offering services like next-morning, next-day, and on-demand doorstep deliveries. It also manages China’s largest reverse logistics service, facilitating swift and convenient consumer returns.
Internationally, Cainiao leads in cross-border e-commerce logistics delivery, aiding merchants on global platforms such as AliExpress, Tmall Global, and Lazada in tackling intricate cross-border logistics challenges. With over 4 million daily average cross-border and international packages handled in the fiscal year ending March 31, 2023, Cainiao is a pivotal player in countries like Spain, France, and Poland, offering localized door-to-door logistics solutions.
Additionally, Cainiao Post integrates third-party parcel collection stations and smart lockers nationwide into its logistics network, enhancing last-mile delivery efficiency with 24/7 package delivery and pickup services.
Promising Horizons for Growth
While many of Alibaba’s core businesses face growth hurdles, Cainiao has stood out with a remarkable 27% revenue surge in the first nine months of the fiscal year ending March 31, 2023, outpacing Alibaba’s groupwide growth rate of 9%.
The company’s autonomous status now allows it to swiftly strategize and execute independent initiatives, fostering potential collaborations with e-commerce platforms like PDD Holdings, expanding its horizons beyond the Alibaba ecosystem.
Cainiao is poised to capitalize on the upswing in cross-border e-commerce, partnering with major players such as AliExpress, Temu, and Shein. Its aim to fulfill Chinese consumer orders within 24 hours and global orders within 72 hours underpins its sustained growth trajectory.
Implications for Investors
Alibaba’s journey may have faltered for long-term investors, hovering around its IPO price from 2014. However, with strategic investments in emerging entities like Cainiao, the tech giant aims for a turnaround.
As Cainiao steadily ascends to the status of a global logistics juggernaut, shareholders stand to reap substantial rewards if the company maintains its growth trajectory. Investors should keenly observe Cainiao’s performance in the foreseeable future.