Chinese e-commerce giant Alibaba is investing US$1.5 billion in building warehouses with the aim of reducing the time it takes for people to receive items bought online.
Alibaba has grown to become the e-commerce leader in China, with it's Taobao.com business the country's largest online retailer. This month Taobao reported it has 370 million registered users, more than double what it had in 2009.
But the explosive growth threatens to strain the shipping and logistics business in China. "E-commerce in China is growing too fast, and exceeds the physical capacity of logistic companies in China," Alibaba Chief Strategy Officer Zeng Ming said at a press conference Wednesday.
Facing this bottleneck, Alibaba is looking ahead and wants to grow the logistics industry. The company and its financing partners will commit between $3.01 billion to $4.52 billion in the next three to five years in logistics development. Alibaba hopes this first stage of funding will then lead its other partners in e-commerce to invest, bringing the total amount to $15.05 billion.
"Ten years from now, we hope that anywhere in China if you buy online, the longest you will have to wait is eight hours for your goods," said Alibaba CEO Jack Ma at an event detailing the company's strategy.
On the information technology side, Alibaba aims to improve the quality of delivery service with an online supply-chain management platform. Merchants that use Taobao can better streamline the way their products arrive to consumers via the site.
While Taobao has 370 million registered users, the company still has room to grow. Official figures released on Wednesday report that China now has 457 million Internet users, adding 73 million new users during 2010. The figure is expected to grow as more rural residents get access to the Internet.
Alibaba stressed that the investment in the warehouses does not mean that the company will start directly managing shipping, or begin delivering goods. "We never said we are a dot-com company. From day one, we always said we are a service company," Zeng said. "We are only leveraging Internet technology to help SMEs and entrepreneurs in China to grow. We will do whatever is necessary to make the e-commerce in China move forward."