Alibaba buys stake in Chinese parcel carrier STO Express

Dive Brief:

Alibaba will purchase a 14% stake in 3PL STO Express, China's fifth largest carrier, for a sum of $693 million from a controlling shareholder, according to Reuters.
This is the fourth investment in a logistics firm by Alibaba after previously backing YTO Express Group, Best Inc and ZTO Express.
STO and the e-commerce giant were already collaborating through Alibaba's logistics platform Cainaio, which links shippers, warehouses and carriers involved with the e-commerce giant.

Dive Insight:

Alibaba is already integrated with the carriers it employs beyond the usual shipper-carrier relationship, but these ongoing investments make those bonds stronger. The e-commerce giant's logistics arm Cainiao, in which it acquired a majority stake in 2017, provides the data infrastructure for many of the carriers it employs.

Last year, Alibaba released its "New Retail" initiative, which included the goal of full integration between online and offline shopping. Chinese players like Alibaba and JD.com are global leaders when it comes to recognizing the power of the supply chain in meeting those goals — especially in China where the supply chain does not yet serve urban and rural customers with equal speed when it comes to e-commerce.

Acquiring a stake in China's fifth-largest parcel carrier is part of Alibaba's plan to fulfill every order within 72 hours. And since Cainiao already provides the digital link between carriers including STO, shippers and warehouses in Alibaba's network, the e-commerce giant has quite a head start on the growing trend demonstrated by comparable retailers, like Amazon and Walmart, taking more control of their supply chains. JD.com has also amassed significant logistics prowess and assets, even offering logistics services to major players like Unilever and Danone.

This trend isn't just about on-time deliveries. Beyond providing logistics services long before the last mile, owning as much data as possible on every transaction and delivery has inherent value for these e-commerce giants, which has led to some friction to Alibaba in the past. The e-tailer suspended Chinese carrier SF Express from making deliveries in 2017 due to a dispute over customer data, according to Reuters.