Written by Casey Hall
SHANGHAI (Reuters) – Alibaba's plans to make its logistics subsidiary a wholly owned subsidiary rather than spinning it off means the Chinese giant is taking competition from e-commerce rivals Shein and Temu more seriously in overseas markets. Analysts said this could indicate that.
The company announced on Tuesday that it had decided not to list Cainiao, a year after announcing its intention to do so, citing reasons including the “underperformance” of Hong Kong's stock market.
At the same time, it outlined further investments in Cainiao's global network to reduce delivery times from five to three days in markets including the United States.
The vast technology company has returned its focus to its core business against the backdrop of the domestic macroeconomic backdrop and the rapid growth of the overseas e-commerce market. Although it has firmly established its number one position in China, it is far from an overwhelming position overseas.
“We see a lot of players in the market being very aggressive, but it's going to be an even bigger market in the future, and we're going to be there as well,” Chairman Joe Tsai told analysts on a conference call Tuesday. I want to participate.''
Alibaba is working on ways to make global marketplaces like AliExpress and Lazada more competitive. The advantage of an early start has waned in recent years, with sales and growth rates outpacing Chinese-founded peers Tem and Shein, both owned by Nasdaq-listed PDD.
Investing in and leveraging Cainiao's global infrastructure could be one way to woo rivals, said Brian Wong, a former Alibaba employee and author of “The Way of Alibaba.”
Cainiao is at the core of Alibaba's logistics, where he is the founder and currently owns 67%, a figure that was supposed to drop to more than 50% after going public. The company operates warehouses as far as Indonesia and Belgium and provides supply management solutions to other logistics companies.
“This is very strategic for the development of international markets. Since Tem and Shein do not own their own logistics infrastructure, this could be a differentiating factor and give Alibaba an advantage in this overseas battle. Yes,” Wong said.
In addition to faster delivery times, Wong said potential positives include a convenient returns process and customer data that Alibaba can keep in-house.
According to Temu's website, standard delivery times to the U.S. currently range from 6 to 22 days. According to Shein's website, 75% of U.S. orders arrive within 10 days.
Synergy
Alibaba announced the spinoff of Cainiao as part of a broader restructuring that includes turning its international e-commerce division into an independent business led by Jiang Fan, who was president of Alibaba's domestic Taobao and Tmall markets.
The business, named Alibaba International Digital Commerce, is much smaller than the domestic market, but has become one of Alibaba's brightest growth areas. AliExpress Choice, powered by Cainiao, saw a 44% year-over-year increase in revenue and a 60% increase in order volume from October to December.
Tsai said on Tuesday that Alibaba wants to “win” in e-commerce with Cainiao playing a central role and regaining market share.
“It is extremely important to achieve close integration between Cainiao's business and our e-commerce business,” Tsai said. He said this will require “patient” investment and that Alibaba is well-funded, with $60.5 billion in net cash at the end of December.
Taking Cainiao private will allow management to “focus on the business rather than being distracted” by going public, Cai said.
“We will focus on developing our core businesses, expanding our global logistics network and building global competitiveness,” Cainiao CEO Wan Lin told Reuters. We will strongly support the
Alibaba has been setting the agenda for domestic e-commerce for many years. Saurav Sen, senior emerging markets analyst at Gimme Credit, said when it comes to overseas, the company's decision to acquire Cainiao instead of reducing its stake shows how much the company is at the mercy of market conditions. He said it was a change of direction.
(Reporting by Casey Hall; Editing by Brenda Goh and Christopher Cushing)
