Cainiao: ecommerce is a happy journey for some

© Timon Schneider

The Loadstar has launched a series of reports on the ecommerce sector, which has been driving growth in air cargo. But are there clouds on the horizon that should worry air cargo stakeholders in particular?

Ask most Europeans whether they have bought goods from Alibaba’s platforms, and the answer is ‘no’. And yet, visit Alibaba’s logistics arm Cainiao’s warehouse in Liege, and clearly someone is buying.

According to Ecommerce News Europe, Alibaba is in fact targeting European SMEs. German SME buyer numbers on the platform were up 14% in the past six months, while UK SMEs are also using it for their procurement needs. It is a far simpler, and cheaper, process than sourcing from China itself. This isn’t B2C, it’s B2B. 

AliExpress is the B2C platform: prices are higher than on Alibaba, which focuses on wholesale, and there are more Chinese sellers and fewer international ones on Alibaba. (There is also Alibaba Wholesale) 

But whichever you use – or don’t – Cainiao says its parent has a “local, cultural fit for everyone”. As does Cainiao, which is essentially taking over where forwarders used to be. 

Thomas Yu, director global hub operations and product development, is loyal to the ecommerce cause.  

“Logistics is not just a physical operation, it’s actually how to enable people’s experience. It’s buying things, it’s a journey to happiness. Why do you buy things? Think about it. No matter what reason you’re giving yourself, it is to be happy.” 

The real question though, is whether other stakeholders in the logistics business can be happy with ecommerce in the long-term. And with Cainiao taking on B2B logistics, forwarders might be among the first to mind. 

Mr Yu said: “It’s a very, very interesting question, whether we are a forwarder. I would rather say we are logistics players or logistics service providers. I cannot say we are the forwarder, but forwarding and forwarders’ role and duties is part of the journey that we require. 

“So that means we also need to have partners to support us. We need to provide the end-to-end journey, including many processes.  

“The journey starts from when you click the button, with the payment, with the shipping selection, with the pick-up from the doorstep, packaging, consolidations, warehousing, transportation, air freight, terminals, customs clearance, arrival clearance, doorstep delivery. You can’t only focus on forwarding.” 

He continued: “We are not integrators. DHL, UPS, they do everything, but not the transactions. We are trying to manage the demand for products. We design the solution, do some of it ourselves, and then we get others to help. So we need to coordinate, bring together multiple companies to work as one.” 

Cainiao does work with some forwarders, chosen on the basis of local knowledge and expertise, or multiple stations. 

“But we must have the same goal. So if we encounter some issues with our partners, we resolve it together.” 

One of the key metrics for choosing partners is their ability to work with Cainiao’s technology. But this is also one of the main concerns for many stakeholders, following an investigation last year into its Liege hub by Belgian intelligence. 

Belgium’s security services told the UK FT they were working to detect “possible espionage and/or interference activities” carried out by Chinese entities “including Alibaba”. One area of scrutiny, said the FT, were software systems that collate economic information, because of legislation forcing Chinese companies to share their data with China’s intelligence services and authorities. 

“China has the intent and capacity to use this data for non-commercial purposes,” the agency told the FT.  

Cainiao is reportedly able to access data about merchants, products, transport details and flows, which could give Chinese authorities valuable insights into supply chain vulnerabilities. 

But Mr Yu insisted there was nothing to fear. 

“I’m not talking about sharing data. It’s connecting to each other via data. I really want to emphasise this. A lot of people still worry about data. Data has compliance rules that need to be followed in every country. We need to do everything based on what is allowed. 

“But no countries or rules disagree about connectivity activities.  

“Think about IATA. IATA wants to produce One Record, which makes connectivity easier. The industry is all about collaboration, all about how we together develop the journey on the same path. 

“How you share is just methodology. Some data I do not need, some data is possible and common and neutral. That is connectivity. 

“People have the right to clarify how it’s used, how we connect. I don’t have an issue about this. The most important thing is whether it’s good for everyone.” 

Liege has become an important part of Alibaba’s strategy; it has also become a favourite with freighter operators, in part because, say local sources, the Customs team is easier to deal with than in other EU airports.  

“It’s much easier to get things done, and to talk to Customs in Liege,” said one local source. “Elsewhere you can’t always talk to them.” This of course begs the question as to whether ecommerce is getting something of an easy ride at the airport, which has struggled with corruption, and a Chinese Customs fraud gang, which had evaded VAT payments. 

Trouble was not limited to the Chinese: in 2021, Liege Airport’s board fired CEO Luc Partoune for serious misconduct after finding irregularities including rigged public contracts, fictitious jobs, and unjustified expense reports. The airport has brought in new German management to clean up the airport, but it remains popular with ecommerce players and airlines. 

Mr Yu said Cainiao liked Liege because of its focus on cargo. 

“We have a very trustworthy relationship with the airport authority. We have a more long-term investment plan together with them, and they just announced their long transition for the development of the airport. That makes us very impressed. If an airport doesn’t have a vision for cargo, we are not on the same path.” 

Cainiao is looking for other European hubs, but has not yet decided upon one. It has yet to break into US markets at all.  

“We are not yet in the US. Not yet. The US is still in a growth period. We have some criteria to design how to grow, and how to invest, because every single dollar counts. 

“But so far, there’s no development in the US. Europe is our major market.” 

Mr Yu claimed Alibaba was in a good place: both with its home country and ecommerce in general. “China is more comprehensive in its manufacturing output than anywhere else. Mexico has become the biggest trading partner for the US, but where is it sourcing from? Globalisation cannot stop.  

“The second thing is about what consumers want. In offline retail or traditional retail, customers will be constrained by the size of shop, the location, the district. There is no space constraint online.” 

Mr Yu said that Alibaba was not constrained by competition, either. 

“We’re not competing with Amazon. First of all, Amazon may have a commodity we don’t have, we may have a commodity they don’t have. So we have different market standards.  

“The second thing is, we do different ecommerce models. A lot of people think about ecommerce as just one model, but it’s not. Amazon does procurement – it will procure from China, or procure worldwide.  

“We allow producers to directly deal with the consumers. Alibaba and Amazon are actually both enabling ecommerce development. We believe that if the industry is growing, all players will.” 

One of the main problems with ecommerce growth, however, is sustainability – but Mr Yu emphasised that not everything is flown.  

“We also have trains into Europe, as well as trucks. There are many possibilities for us. It’s not difficult. 

“I think the mix of modes is all about consumer selection. The consumer has a choice about which mode they want. Some people may not want things fast.  

“We have some sea freight, for bulk volumes. When customers buy in bulk, they will send by ship to their warehouse and will do standard import clearance, pay duty, then it will be stored in their warehouses or our warehouses, then once consumers need, then they can deliver.” 

But Mr Yu added that the environment was everyone’s problem, not just ecommerce players.  

“Honestly, sustainability is everyone’s job. It’s not just ecommerce which is creating pressure on sustainability.” 

And he argued that Cainiao was limiting its carbon footprint. 

“First of all, we try to minimise the routing to be more sharp and precise, rather than wasting time on too many steps. The more we do on the process, the more we reduce waste and carbon emissions. We have a scheme in China for recycling packaging. If we can have more great designs for packages, overpacking will be reduced. 

“The packaging can be reused, or even can be reinvented. Our warehouses use solar for energy, even for vans. And in China, we have some incentive schemes for people to manage waste, recycle it, re-use it.  

“Alibaba Group is very determined to support its ESG compliance policy. Sustainability is everyone’s job. You cannot say because you are in this industry you have more responsibility. No, everyone has responsibility. It starts with the individual.” 

One day perhaps, the individuals buying airfreighted ecommerce goods may well reconsider their responsibilities. But for now, Cainiao, and its Chinese parent, seem pretty happy with the journey as it is.