Industrials Author: Yangni Liu Editor: Luke Sheehan Jul 26, 2020 08:51 AM (GMT+8)

Alibaba is operating Cainiao as a distinctive platform, with a focus on building a global network. After the shock of COVID-19, CAI Niao has even shown a 50% increase in its daily package volumes, compared with the last quarter.

A package. Image Credit:   Mohamed Hassan / Unsplash

► Cainiao’s innovations in synergy and digitalization are speeding up the time needed to send goods, helping many people and firms during COVID-19.

► With increasing daily order volumes, the logistics network is expected to be recognized as a new leading global express delivery platform.

The emergence of COVID-19 has disturbed many firms’ plans. The real economy was also affected negatively. For instance, many massive companies went into liquidation, even some traditional express firms faced a decline in order volumes. However, Cainiao has become a star despite this unfavorable situation, leveraging improving global transportation services to satisfy demand.

With its mission to deliver goods within 24 hours domestically and 72 hours globally, Cainiao aims to promote digitalization and intelligence in the delivery industry. The firm was established by Alibaba, STO Express, YTO Express, ZTO Express and Yunda Holdings. From a platform designed to improve efficiency by 30% and the first cloud logistics platform to provide services for clients and businesses, Cainiao became essential during the crisis, sending 60 million relief goods to 149 countries.

How did the logistics network platform become one of the mainstays during COVID-19? This was due to Cainiao’s two main characteristics – synergy and digitalization. Synergy is about building a synergetic relationship with express firms and airlines, improving the efficiency in the platform’s operations. For instance, Cainiao needed only two hours to create a group fighting against COVID-19, involving 50 logistics firms globally. Moreover, Alibaba has set up an Electronic World Trade Platform (e-WTP) in Europe, which helped send goods immediately with 20% lower in the logistics cost. Secondly, the increasing transport speed is the result of Cainiao’s seven-year effort in digitalization. To be more precise, the appearance of eHub was crucial – a digital free trade zone, mainly designed to speed up global trade. It only requires 120 hours to bring Thai durians to Chinese warehouses. Hence, it is not hard to understand why Cainiao looked like the right choice when 60 airlines were grounded during the COVID-19 crisis. Even the United Nations chose the firm to cooperate with from last April.

Except for the innovations in synergy and digitalization, Cainiao is promoting the upgrading of industrial chains. For example, thousands of Cainiao stations will be upgraded to digital stations providing life services. To bring logistics closer to consumers, these stations will provide group-buying, laundry and recycling services. ‘Cainiao Guo Guo’ (菜鸟裹裹), an express delivery platform, could be seen as an example, providing more efficient services. Furthermore, the digital platform keeps expanding its international services, largely increasing its speed in sending international parcels. Precisely, Cainiao Guo Guo has opened international services this May, allowing mainland China to deliver goods to the other 20 countries.

Not only does Cainiao have advantages in the innovation, but it also shares the results in its fourth-party logistics (4PL) and asset-light model. 4PL is a new concept that was raised by Accenture in 1998, meaning providing logistics and supply chain solutions. As a 4PL company, the logistics network platform has integrated massive mature firms into a transparent and reasonable network. According to the president, Yun Ma, the purpose of Cainiao is not to compete with other express firms but to build a resource-sharing platform. Regarding the asset-light model, it is different from JD’s self-built logistics, saving money from construction costs. Based on Alibaba’s resources in big data, the firm is set to improve accuracy and stability in logistics. Specifically, big data can calculate the most convenient route from delivering to receiving, lowering transportation and time costs.

Although Cainiao only occupied approximately 4.2% revenues in Alibaba’s total revenues for the last two years, it might still stand for Alibaba’s bigger dream in the future as the e-commerce giant keeps investing in it. Precisely, Alibaba has added another CNY 5.3 billion investment to Cainiao, announcing another CNY 100 billion within the next five years. Alibaba aims to foster a new digital economy and build a commercial infrastructure via innovation and technological expansion, providing services to 2 billion consumers globally. In other words, Alibaba could use Cainiao’s globally intelligent networks to realize it. For instance, the logistics platform has already provided services to over 0.75 million import and export merchants, and it could further help to expand Alibaba’s main business — core commerce. Moreover, Cainiao’s daily volumes occupied 10% of Alibaba’s retail platform in 2019, providing services to 95% orders from Tmall. Even under the shock of COVID-19, there was still a 22.26% increase in its revenue compared with last year’s first quarter, and the core commerce accounted for 82.11%.

The most surprising thing is that Cainiao is expected to be one of the global express platforms in the future. According to the ‘Global Smart Logistics Summit 2020’ (全球智慧物流峰会), Cainiao’s daily package volumes have overpassed FedEx and DHL, and hover lower only than those of UPS. Moreover, the logistics network platform’s average daily package already surpassed the average daily package volumes of UPS, FedEx and DHL in 2017, hitting about 35.29% higher.

In a word, Cainiao’s continuous innovation, 4PL and asset-light model have made it different from other traditional express delivery businesses. Additionally, with support from Alibaba, the firm will keep expanding its services globally and become a truly global intelligent network. It is hard to deny that COVID-19 could be seen as a business opportunity for Cainiao to present its strengths. The company clearly intends to place further effort into updating digitally in the long run.