Alibaba invests in Haier to improve logistics
December 10, 2013 Leave a comment
December 9, 2013 1:30 pm
Alibaba invests in Haier to improve logistics
By Sarah Mishkin in Taipei
Alibaba, China’s leading ecommerce company that is expected to list in the coming months, will invest HK$2.8bn (US$364m) in Haier, the Chinese appliance maker to expand its logistics and distribution network.The tie-up between Alibaba and Haier comes as the explosive growth of ecommerce in China is sometimes hampered by patchy delivery logistics in the nation of 1.3bn people. The deal sent Haier’s shares in Hong Kong up 13.3 per cent on Monday.
Most of the funds will go towards establishing a joint venture with Haier subsidiary Goodaymart, a retailer that already has 26,000 stores and distribution sites in 2,800 counties in China. The joint venture will focus on developing a China-wide network for delivering and installing appliances and other large goods, according to a statement from the companies.
On last month’s Single’s Day – a shopping holiday promoted by Alibaba – the ecommerce group sold $5.7bn worth of goods. The US’ Cyber Monday after Thanksgiving this year had just $1.7bn spent on desktop online shopping, according to ComScore. In total last year, Alibaba’s multiple online platforms handled $171bn worth of orders.
Although Alibaba is an online platform for other companies to sell goods and does not stock any products itself, it works with brands like Haier that sell on its online sites, which include Tmall and Taobao. Before Single’s Day, Alibaba employees visited sellers and logistics companies to check that they had enough capacity to handle the orders expected.
“In the past, there were logistic companies that had tens of thousands of employees and thousands of delivery station that still relied on paper work,” said Judy Tong, an Alibaba executive handling logistics, in an interview before this year’s Single’s Day. “It is up to us to encourage the transformation.”
Miscommunication had led to some system meltdowns in the past, she said, such as warehouses left so full of packages that doors got blocked.
The cost of those meltdowns adds up and can dissuade consumers, particularly in more remote inland cities, from buying online.
For companies that sell goods themselves, such as Alibaba rival 360 Buy, logistics costs can be equivalent to more than 10 per cent of total sales, far higher than the costs Amazon faces, according to analysis by CLSA, the Asia-focused brokerage. In 2011, McKinsey researchers found, over half of the roughly $1.3bn invested by ecommerce service companies went into improving logistics.
About bambooinnovator
Bamboo Innovator 