Chinese e-commerce juggernaut Alibaba is opening three new refrigerated distribution centers in Shanghai, Beijing and Guangzhou to deliver perishable goods to consumers in 18 cities. Alibaba announced Tuesday that the cold chain facilities will be owned by its logistics arms Cainiao. The Hangzhou-based online retailer owns 48% stake in Cainiao.
China badly needs an effective cold chain delivery system
Cainiao coordinates deliveries through its central logistics systems that connect various regional express delivery companies. Alibaba plans to expand its fresh food delivery services to 50 major cities across the country by the end of the year. Besides generating additional revenue, the move will help Alibaba better compete against JD.com, which has been gaining a foothold in the fresh food delivery segment.
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Cainiao will offer delivery of produce, meat, and other perishable goods purchased on Tmall and Taobao within 24 hours. Maggie Chen, head of fresh food delivery at the logistics firm, said that over 80% of vegetables and fruits in China are shipped at room temperatures, leading to a spoilage rate of as high as 40%. So, an effective cold chain delivery system is “sorely needed.”
Alibaba sees a huge opportunity in cold chain logistics
Alibaba’s new distribution centers will offer cold chain storage and delivery with temperature-controlled facilities, refrigerated trucks, and special cold boxes for transport. The Guangzhou and Shanghai centers started operations a few days ago, while Beijing center will open next week. Cainiao will link sellers on Alibaba platforms with logistics partners to offer fresh food delivery services.
Demand for grocery deliveries in the country is largely driven by concerns about food safety issues. Plus, consumers in large cities don’t want to deal with heavy traffic. Alibaba rival JD.com has been investing heavily in its logistics systems. Last month, JD.com invested $70 million in fresh produce seller FruitDay. German consulting firm Roland Berger estimates that the Chinese cold chain logistics market will grow 25% YoY to reach $76 billion by 2017.
Alibaba shares jumped 1.70% to $87.55 at 10:04 AM EDT on Wednesday.