The Chinese e-commerce company’s Cainiao logistics affiliate hopes to offer next-day deliveries in 50 cities by the end of this year, up from 34 cities currently, said Judy Tong, president of Cainiao.
In a presentation to Cainiao’s logistics and delivery partners on Thursday, she also urged the logistics companies it works with to avoid a fierce price war that she said has hurt service standards. If it continues, “ultimately we will lose this market,” she told the audience.
‘If we find that you knowingly were engaged in falsifying credibility just to make profits, sorry, but on our platform this is something that deserves a beheading.’
Unlike JD.com, which operates its own logistics services, Alibaba relies on third-party providers. Alibaba’s approach is intended to keep costs down but also gives it less control over the services that bring packages to Chinese consumers.
Some merchants on Alibaba’s platforms engage in a practice known as “brushing,” which involves generating fake orders to artificially inflate their sales volume, which then pushes a seller higher in search-engine results. Delivery companies sometimes work with merchants to help them with the practice, often delivering empty boxes to the “brushers,” but Alibaba executives have said the fake numbers hurt its credibility.
In April, Cainiao terminated the services of 11 courier companies from its platform either on suspicion of being involved in fake transactions or for failing to share data with the network’s platform.
Over the past two years, Alibaba has sought to improve China’s fragmented logistics industry to try to make deliveries of orders from Alibaba’s popular shopping sites quicker and more reliable. It holds a 48% stake in Cainiao, which said in 2013 it would invest $16 billion in logistics over five to eight years.
The bulk of that investment so far has gone into acquiring land and establishing a basic nationwide infrastructure of warehouses in at least eight cities, Ms. Tong said.
The network already has one million square meters of warehouse space and is set to more than double that capacity this year. In addition, Cainiao plans to buy another two million square meters of land this year, Ms. Tong said.
In the U.S., Amazon.com Inc.AMZN-0.81% is also casting its lot with ever-faster deliveries, and even making it free. The online retailer said its same-day delivery option—available in 14 metropolitan areas—will now come at no extra fee to those who pay $99 a year for an Amazon Prime membership. Amazon said Prime members wanting same-day delivery will no longer pay the $5.99 per-order fee for goods purchased by noon, provided their order size is at least $35. In return, the Seattle company pledges to get users their merchandise by 9 p.m. that night.
An even speedier service, Prime Now, is already free in three overlapping cities for customers who need their merchandise in about two hours. The Prime Now same-day service is available in three cities with same-day delivery—New York, Atlanta and Baltimore—and is already free for Prime customers that live within spitting distance of a warehouse. For delivery within an hour it costs $7.99.