Alibaba Group has agreed to take a larger stake in Singapore Post and invest in a subsidiary of the publicly traded post office to strengthen their joint development of eCommerce logistics services in the Asia Pacific region.
The deal, announced today, calls for Alibaba Group to buy an additional five per cent of SingPost shares for $138.6 million, increasing its ownership position in the mail and parcel carrier to 14.51 per cent. Alibaba will also invest $67.85 million in SingPost’s Quantium Solutions International (QSI), which runs a logistics and fulfilment network in more than 10 Asia Pacific countries.
Alibaba, China’s largest eCommerce company, has been aggressively courting businesses outside the mainland in order to promote cross-border e-commerce, working with companies such as SingPost to reduce some of the barriers to efficient worldwide delivery of small parcels ordered online-impediments such as relatively high shipping costs, lengthy delivery times and complications in getting orders through customs.
Cross-border online shopping – consumers buying products directly from overseas retailers via the Web – will see compound annual growth of 27 perc ent over the next five years, double the rate of worldwide B2C shopping as a whole, according to a recent report from Accenture and AliResearch, Alibaba’s research arm. While Alibaba Group currently makes less than five per cent of its revenue outside of China, Jack Ma, the company’s executive chairman, said his goal is for overseas eCommerce to eventually make up half of company revenue.
Alibaba and SingPost began collaborating last year when Alibaba, through an investment vehicle, acquired an initial stake in SingPost. The deal announced today deepens their relationship, the companies said, with Alibaba taking a 34 per cent stake in QSI, while SingPost will hold 66 per cent.
Under the agreement, QSI, which offers eCommerce logistics and warehousing across Asia Pacific, will be reorganised as a joint venture between SingPost and Alibaba Group. In addition, QSI will also become a platform for both parties to increase collaboration, with QSI providing eCommerce warehousing, last-mile delivery and other end-to-end eCommerce solutions. Alibaba and SingPost also entered into a joint strategic business development framework to further improve efficiency and integration between the companies, according to a press release.
Alibaba “started as our customer and then last year became our shareholder and business partner,” said SingPost group executive officer Wolfgang Baier.
“We are now taking the next step by building a regional e-commerce logistics platform and infrastructure for e-commerce players across Asia Pacific, based on Quantium Solutions.”
Confronted with dwindling revenue in the digital era, national mail carriers such as SingPost have been increasingly trying to adapt by expanding services into the high-growth e-commerce arena.
“The pace of transformation at SingPost has been accelerating steadily,” said SingPost chairman Lim Ho Kee. “As a postal service provider, we are on a burning platform, facing a global decline in mail revenue with trends like e-substitution and lifestyle changes.”
Lim called the partnership with Alibaba “a win-win situation for both of us because we share similar goals and have a natural fit between our operations across Asia”.
Alibaba Group CEO Daniel Zhang said his company and SingPost have in the past year “devised a series of customized logistics solutions in various markets. With these new initiatives, we hope to further drive synergies to help global brands and merchants with convenient access to China and at the same time help Chinese businesses sell and ship easily around the world.”
The investment agreement, which must be approved by SingPost shareholders and regulators, calls for Alibaba Group to purchase 107,553,907 existing shares in SingPost, which trades on the Singapore’s stock exchange. Upon completion of the deal, Alibaba’s deemed interest on a fully diluted basis in SingPost will rise from 10.23 percent to 14.51 percent.
* Original report by Jim Erickson, published on Alizila, the independent, Alibaba-founded news network.