Alibaba Leads a USD1.38b investment in delivery giant ZTO

Alibaba Group Holding Ltd. is leading the purchase of 10 percent of Chinese delivery service ZTO Express (Cayman) Inc. for USD1.38 billion, a deal that’ll augment the e-commerce giant’s ability to ship packages around the globe.

The Alibaba-led investor group includes its own logistics arm Cainiao, the company said in a statement that didn’t specify other buyers. Under an agreement, Cainiao and U.S.-listed ZTO will collaborate on everything from delivery and warehouse management to technology.

Chinese express delivery has ballooned in past years alongside a boom in online shopping, as consumers increasingly demand faster and more reliable shipping. Alibaba and arch-rival JD.com Inc. are spending billions not just to shore up their networks and shorten delivery windows to a day or less, but also on expensive forays into old-fashioned retail and data computing.

“The growth of e-commerce and new retail in China demands more efficient express delivery and expanded logistics services,” Meisong Lai, ZTO’s founder and chief executive officer, said in the statement. “This partnership will enable us to expand our selection of high quality service offerings both in China and internationally.”

The cash infusion will bolster ZTO as it expands its network to keep pace with fast-growing rivals. Chinese express-delivery operators are looking to counter rising labor costs in part through automation and more effective use of capacity. The company was among local services that raised freight charges last year to try and end an intense price war that’s hurt profit margins.

ZTO, which debuted in an initial public offering in October 2016, has been a longstanding partner to Alibaba and at one point relied on Alibaba for about three-quarters of parcel volume. But the company, just one among a coterie of players including SF Express and Shanghai Yunda Express Co. in a fragmented market, is looking to invest in automation and its international reach.

Neither Alibaba nor ZTO outlined specific projects they might explore jointly. The Chinese e-commerce leader already operates a massive logistics player in Cainiao, created with partners with the aim of supporting Alibaba’s online operations. It’s now a provider of same-day and next-day delivery in nearly 1,500 Chinese districts and counties and operates Cainiao Post: a network of last-mile stations covering neighborhoods in the top 100 cities and around 1,800 university campuses across the country. Bloomberg