Over the past two years, groceries have become an increasingly important segment for Chinese e-commerce companies. Worn down by food safety scandals and crowded supermarkets, shoppers are turning to online stores to buy quality products and demanding increasingly speedy shipments.
Now Alibaba, which is facing slowing growth despite its position at the head of China’s e-commerce market, is ramping up the size of its countrywide logistics network.
Cainiao, Alibaba’s logistics affiliate, announced a major expansion that includes a new 60,000 square-meter grocery distribution center to cover 25 cities in eastern China. The warehouse, which will begin operating in July 2015, is the largest of Cainiao’s five grocery distribution centers and will power deliveries of Tmall Supermarket orders in Shanghai, as well as the provinces of Jiangsu, Zhejiang, and An’hui. Cainiao also plans to make next-day deliveries available for more shoppers in southwestern China with another distribution center based in Chengdu.
The company says it will be able to deliver groceries to over 250 cities by the end of this year, with next-day delivery available in 50 cities.
Cainiao’s focus on groceries ties into Ji Su Da (which means “fast delivery”), a separate initiative that Cainiao launched earlier this month to deliver healthcare products and other items to shoppers within just three hours of ordering. Ji Su Da is currently available in Beijing, Shanghai, Guangzhou, Hangzhou, and Tianjin, and will be expanded to 14 more major cities by the end of this year.
According to Nielsen, 46 percent of consumers in China have purchases groceries online, one of the highest rates in the world. Efforts to get time-sensitive products, like fresh produce and prescription drugs, are a key growth strategy for Chinese e-commerce companies.
This month, Alibaba bought a minority stake in Shanghai YTO Express, one of Cainiao’s main logistics partners, while one of its main rivals, JD.com, announced a $70 million investment in FruitDay, which imports and sells fresh produce.
The hyper-efficient logistics network Cainiao is building for perishable goods can also pave the way for speedier delivery of other products. One of Alibaba’s most ambitious goals is the creation of the China Smart Logistics Network, which it hopes will be able to delivery shipments to any city in China within 24 hours.
The network will not only give Alibaba an advantage over other e-commerce companies, but also allow it grab a big chunk of China’s growing courier delivery market from established players like the state-owned China Post.