Alibaba’s eCommerce Delivery Infrastructure – Create Winning Partnerships Lesson for India

Alibaba Logistics eCommerceIn the North Western United States, hedge fund manager turned entrepreneur was building global eCommerce giant Amazon backed by massive Technological innovations unheard of in the retail industry. In Asia, Jack Ma realizing the potential of Internet for commerce built Alibaba mostly on Winning Partnerships. We’d like to take a look on Alibaba and its group companies’ ecommerce delivery infrastructure such a bottleneck in this part of the world.

All the orders of Alibaba’s merchants are handled by over 16 third-party express companies. The top four express companies (together are known as “Tongda”) by volume have adopted the franchise model that controlled 76% of market share by volume in 2015. Instead of having direct control over end-market outlets and last-mile delivery, the franchisers focus only on developing nationwide line-haul networks and sorting centers, and charging franchisees for using them.

Under each franchise, there are thousands of franchisees built by local entrepreneurs. As independent entities, the franchisees are responsible for acquiring their own customers (e.g., Taobao / Tmall / JD’s 3P merchants), negotiating pricing contracts, and absorbing all related sales and administrative costs locally. We note that Alibaba and its related affiliates have investments in a few express companies. It purchased a 17.5% stake in YTO as of end-2015 (YTO was founded in 2000) and a 27.4% stake in Best Logistics as of Jan ’16 (founded in 2003). The daily operations of these two companies and their franchisees are independent of Alibaba.

Technology is Powered by Cainiao – is a joint venture between Alibaba and various parties. Cainiao is not a traditional logistics service provider; rather, it is a logistics data company that provides real-time access to information for buyers, sellers and express companies for the delivery process. Buyers can see real-time information on orders, delivery status and user feedback, while sellers receive performance analytics on the express partners, including delivery performance, customer satisfaction rating / complaints, etc Cainiao seeks to increase cost efficiency and shorten delivery times for its eCommerce ecosystem. The ultimate goal, according to the company, is to support over 100mn packages per day anywhere in China within 24 hours of being placed.

Can Indian eCommerce entrepreneurs – Flipkart, Jabong, etc take a leaf out of Jack Ma’s Alibaba saga and create winning partnerships as we all know that “In competition, individual ambition serves the common good.” – Adam Smith and improvised further by Dr John Nash as “The best result will come where everyone in the group does what is best for himself and the group” 🙂

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