Alibaba’s logistics arm is opening refrigerated distribution centers for fresh groceries in three major Chinese cities. Located in Beijing, Shanghai, and Guangzhou, the warehouses will not only allow Alibaba to meet growing demand for grocery deliveries, but also help it better compete against rivals like JD.com, which has invested heavily in its own logistics system.
The new temperature-controlled distribution centers operated by Cainiao, which Alibaba holds a 48 percent stake in, are designed for fresh produce, meat, and other highly perishable food items. They will allow Alibaba to expand its 24-hour delivery service to 50 new cities by the end of this year.
Focusing on cold-chain logistics may also help Alibaba boost its revenue from groceries, which have very low margins. Cainiao’s senior logistics manager Maggie Chen has said that 80 percent of fruits and vegetables in China are shipped at room temperatures, resulting in a whooping spoilage rate of 40 percent.
Other companies focusing on cold-chain shipping include JD.com, which invested $70 million in fresh produce seller FruitDay last month.
Demand for grocery deliveries in China is driven not only by concern about food safety issues, but also by the fact that consumers living in major cities often don’t own cars or have to deal with heavy traffic, making weekly shopping trips an extremely onerous task.
While shoppers are already used to purchasing specialty items, including imported food online, the need for fresh staples means that the cold-chain logistics industry is expected to grow 25 percent per year until it reaches revenue of 470 billion RMB (about $76 million) in 2017.
The opening of Cainiao’s three distribution centers is part of a major expansion of its logistics network that includes a new 60,000 square-meter warehouse in eastern China.