Alibaba’s logistics arm, Cainiao, on Wednesday launched a new express delivery service that will put it in a position to compete directly with delivery companies such as JD Logistics and SF Express. The major move comes a week after Alibaba appointed Joe Tsai as the group’s chairman. Cainiao CEO, Wan Lin, unveiled the new service during Cainiao’s annual Global Smart Logistics Summit, promising that it will offer half-day, same-day, and next-day doorstep deliveries, along with other “high-quality” services.

Why it matters: Wan stated that the company was once “deeply conflicted” about whether to establish its own domestic logistics operations. However, as Cainiao has begun preparations for a listing in Hong Kong, it has become crucial for the firm to become sustainable and competitive in China’s crowded delivery industry.

• Cainiao is expected to pursue an independent IPO within the next 12 to 18 months, according to Alibaba’s latest financial results.

Details: The new service, named Cainiao Express, is an expansion of the express delivery previously provided exclusively to select Alibaba-owned businesses such as Tmall Supermarket, Freshippo, and Tmall Global; e-commerce merchants on Taobao regularly rely on third-party courier services.

• During the summit, Cainiao Express announced partnerships with Chinese dairy company Adopt A Cow, beer manufacturer Tsingtao Brewery, and Intime Retail.
• Joe Tsai, the chairman of Cainiao, and soon-to-be chairman of Alibaba in September, said in a pre-recorded video that Alibaba hopes to continue driving economic growth through online consumption, as it remains the most important force for economic development. Tsai also emphasized the crucial role of “efficient logistics operations.”
• Cainiao is also actively gearing up overseas expansion plans in collaboration with Alibaba’s global online platform AliExpress, saying they will launch a global delivery service this year that promises cross-border parcel deliveries within five working days.

Context: Building an independent express network and creating cost-effective express services requires heavy upfront costs, as well as higher operational costs. 

• JD’s logistics arm JD Logistics has not yet achieved profitability despite being known for prompt and trustworthy fulfillment. In 2022, it recorded a yearly loss of RMB 1.09 billion.