E-commerce has sparked a logistics boom in China over the past decade, turning small-town delivery companies into multinational companies. A leading player, YTO, is preparing to expand internationally after receiving 6.6 billion yuan, or $ 970 million, from its longtime ally and customer, Alibaba.
The 20-year-old YTO announced this week that it will sell 379 million shares in Alibaba at a price of 17.4 yuan per share, increasing Alibaba’s stake in YTO from 10.5% to 22.5%. The founding couple of YTO owns a majority stake of 41% of their wholly owned company following the transaction.
The new investment will allow Alibaba and YTO to deepen collaboration in areas such as delivery, air freight, global network and supply chains, and digital transformation to enhance their global reach.
An Alibaba spokesman said the company is “pleased to further strengthen the strategic partnership with YTO, which is focused on digitization and globalization to improve customer service skills.”
YTO, which has a 14% share of the Chinese express delivery market, is one of the five logistics giants that come from the eastern Chinese district of Tonglu. Along with competitors STO, ZTO, Best Express and Yunda, the rise of YTO is inextricably linked with Alibaba, which relies on third-party logistics services rather than building its own infrastructure like Amazon and JD.com.
The e-commerce giant has invested various amounts of money in all of Tonglu’s five major couriers over the years, a relationship that anchors its logistics arm, Cainiao, which brings together vendors and express couriers to process 50 billion packages a year.
The duo was already a partner in the international expansion in 2018 when a joint venture between Cainiao and YTO began building a digital logistics center at Hong Kong International Airport, the world’s busiest cargo airport. The state-owned airline China National Aviation Corporation is also involved in the joint venture, and the center is expected to start operations as early as 2023.
By 2019, YTO had set up 18 companies and 53 gas stations around the world, supporting sales in 150 countries and regions. The overseas push plays with its larger goal of realizing the enormous export potential of the Belt and Road Initiative, China’s grand plan to build railroad lines, telecommunications networks, and other forms of infrastructure around the world.