Alibaba and partners look to lead in global express revenues

According to China’s State Post Bureau, China overtook the US to become the world’s largest express parcel market by volume. In a recent report, the State Post Bureau noted that in 2014 total volume was 13.96bn items, a 51.9% increase over 2013. Yes, you can thank e-commerce for the explosive growth.

However, while the volumes are strong, revenues still lags behind the US. In fact, according to the Bureau’s report, total revenue generated by China’s express delivery industry, while up 41.9% year-over-year, was still less than 80% of that of UPS’ revenue alone.

In addition, currently, there are not any Chinese domestic express providers that can deliver goods globally such as the big four – DHL, FedEx, TNT and UPS. With that being said, express providers such as SF Express and STO are making great strides towards overseas expansion. However, YTO Express took what may be a giant step forward towards global success thanks to Alibaba.

This past week, Alibaba and Yungfeng Capital acquired a reportedly 10% stake in YTO Express. According to YTO’s Chairman, Yu Wiejiao, Alibaba and YTO plan to build a global express delivery service that will offer a variety of products and better last-mile service.

Wiejiao said, “Chinese private delivery services are still lagging behind global delivery giants such as UPS and FedEx in terms of the management team, networks and the information system. I believe Alibaba can help bridge the gap.”

And indeed, Alibaba itself is in search of the global prize. International represented only 9% of its total revenue for first quarter 2015 which prompted Alibaba’s CEO, Daniel Zhang to say, “We must absolutely globalize”. So, in turn, it recently introduced its Alibaba Merchant Delivery service in Southeast Asia. The service is designed to provide sellers with a tool to easily deliver goods to customers overseas. Singapore Post, which Alibaba has also invested in, is its first logistics partner in the programme. Members in Singapore, Thailand and Malaysia will be able to utilize Singapore Post’s e-commerce, postal and logistics solutions at preferential rates.

So as the “Big 4”gets set to become the “Big 3” thanks to FedEx’s planned acquisition of TNT, could Alibaba and its partners take that empty fourth slot? It could but it will be difficult due to the intricate global networks already established by these major integrators. A lot of investment will be required. Alibaba certainly has the money but is it ready to become a global express/ logistics provider?