How long does it take for a cross-border package to travel from a Chinese merchant to an overseas consumer? Through years of continuous exploration, Cainiao has provided different answers: 20 days, 10 days, 5 days, with various delivery times paired with different prices to create a more cost-effective product matrix. This enabled Cainiao to achieve its milestone goal of processing 5 million cross-border and international packages daily in fiscal year 2024.

Behind these products, Cainiao's global cross-border logistics network serves as the most crucial support. As Alibaba now focuses its attention on e-commerce, Cainiao has launched its focused strategy, with internationalization and technology becoming Cainiao's new strategic directions. Some domestic express delivery services and logistics services related to AliExpress and Taobao Tmall Group have been spun off from Cainiao.

What will this streamlined territorial adjustment bring to the 3.0 version of Cainiao? The answer lies within Cainiao's global cross-border logistics business.

**Global Cross-Border Logistics Becomes Lifeline**

On July 27, STO Express announced its plan to acquire Danniao Logistics, pushing Cainiao's internationalization-focused development strategy into the industry spotlight. Cainiao had previously transferred some platform logistics operations to AliExpress and Taobao Tmall Group, raising industry doubts about this contraction strategy.

In early August, Xiong Wei, Senior Vice President of Cainiao and General Manager of Cross-Border Logistics, explained Cainiao's internationalization strategy to media. On one hand, Cainiao's strategy must align with Alibaba Group's overall strategy to enhance market competitiveness. On the other hand, Cainiao has continuously invested in cross-border networks for years, and current overseas expansion trends continue to create more cross-border logistics demand.

According to Xiong Wei, starting from the second half of last year, Cainiao determined globalization and technology as its main development directions, combining its own development needs with Alibaba Group's overall strategic arrangements. Direct logistics management services for Alibaba's e-commerce platforms were transferred to the platforms themselves, while logistics network infrastructure, external customers, and other aspects supporting these logistics services remain under Cainiao's control to accelerate market-oriented development.

Over nearly 10 years, Cainiao has continuously invested in international warehousing and supply chain, successively launching international logistics products with superior delivery times, such as "$2 for 20-day delivery," "$5 for 10-day delivery," "$10 for 5-day delivery," and "3-day delivery across Europe." Through products with better cost-effectiveness compared to the market at the time, Cainiao carved out its foothold in the global cross-border logistics market.

In terms of order volume, in fiscal year 2024 (ending March 2024), Cainiao processed over 5 million cross-border and international packages daily on average, an order scale exceeding current global leading logistics companies. Such massive volume has gradually enabled Cainiao's heavy-asset global cross-border logistics network to operate efficiently and cost-effectively.

In Cainiao's previously released quarterly and annual results, the view that "international logistics drives revenue growth" has rarely been absent. Especially after 2018, Cainiao's ambitions in cross-border logistics and supply chain business became increasingly evident, with persistent investments in key nodes of the global logistics network, major trunk routes, last-mile delivery, and parcel lockers. The company also used capital acquisitions to acquire 4PX, a comprehensive cross-border e-commerce service provider, and last-mile delivery companies in various countries, further densifying the network within the original cross-border logistics framework.

This sustained strategic deployment became key to supporting Cainiao's entry into the 3.0 era. Xiong Wei revealed that globalization business now accounts for more than half of Cainiao's business structure, with this proportion expected to continue rising.

Xiong Wei told media that the first five years after Cainiao's establishment in 2013 represented Cainiao's 1.0 era. During this period, Cainiao launched electronic waybills, apps, and other products, driving logistics through technology. From 2018 to 2023, Cainiao made substantial continuous investments in warehousing, supply chain, and other businesses. After 2024, Cainiao emphasizes globalization and marketization more strongly, representing the focused strategy mentioned above and expansion of external customers.

"Cainiao's external business has exceeded business from Alibaba, and we will accelerate marketization going forward," Xiong Wei stated.

This explanation represents the logical foundation for Cainiao's divestiture of some logistics businesses - more market-oriented competition can forge a more independent Cainiao. In fact, over recent years, the proportion of Cainiao's external customers has always been a focus for both Cainiao and the industry, as it indicates whether Cainiao has stronger capabilities to handle external markets.

Now, under Alibaba Group's overall strategic layout, AliExpress and Taobao Tmall Group no longer designate Cainiao exclusively. To win these commercial flows, Cainiao must compete alongside third-party logistics service providers.

"Cainiao was among the first to invest in globalized express delivery like cross-border e-commerce, including investments in core logistics trunk routes and eHubs (electronic distribution centers). These businesses saw further development in recent years," Xiong Wei told media.

He further noted that demand for globalized logistics networks has strengthened, including Chinese overseas e-commerce platforms and overseas global enterprises, all accelerating development, with these platforms gradually becoming Cainiao's customers.

Besides the above factors, increasingly intense competition in the domestic market has made Cainiao pay more attention to overseas markets. From a capital expenditure perspective, Xiong Wei analyzed that the golden period for establishing an express network in China has passed, and competition has now entered high-level battles. Establishing a logistics network overseas is relatively easier.

However, he also mentioned that overseas markets have their own difficulties, such as different policies in different countries, and achieving network stability and continuously breaking through delivery times and product competitiveness under various uncertainties is challenging.

Regarding profit margins, domestic express delivery prices continue hitting new lows with virtually no room for profit expansion, while cross-border logistics costs account for 20%-40% of goods' value, and DHL's cross-border express gross margin exceeds 20%.

Nevertheless, Xiong Wei also stated that the profit margins achievable by domestic cross-border logistics companies depend on their products' delivery time differentiation and competitiveness. Business volume growth and technology application may further expand profit space.

**Cross-Border Delivery Times**

In Cainiao's globalization business, over 70% relates to e-commerce, with the main product being "$5 for 10-day delivery," accounting for approximately 70% of international logistics share. The upgraded "$10 for 5-day delivery" product gradually accounts for 20%-30% of share. Relatively speaking, the earlier "$2 for 20-day delivery" product has retreated from its former mainstream position, currently used only in few countries for specific categories.

Changes in Cainiao's product structure precisely illustrate the importance of delivery speed, becoming the core pivot for Cainiao's gradual expansion of cross-border logistics networks.

"Logistics is a highly scaled and networked business. The larger our volume and higher our efficiency, the better we can make costs and delivery times," Xiong Wei told media.

He further stated that improved delivery times not only enhance consumer experience but largely determine repeat purchases. "When I spoke with an overseas e-commerce platform CEO, he had very clear numbers - for example, within a certain number of days, for every day faster delivery, consumer repeat purchase rates increase by a specific amount. Only when today's express delivery arrives will I place the next order. In other words, the faster each delivery arrives, the more significantly my annual purchase frequency increases."

In cross-border trade, logistics represents a significant portion - approximately one-third of $100 in cross-border GMV (Gross Merchandise Value) consists of logistics and supply chain-related costs. Improved logistics efficiency is key to whether cross-border business models can work and continuously optimize.

To date, Cainiao's logistics network covers nearly 200 countries and regions, with deep operations in 50 countries. Overseas local express delivery covers 9 countries, with 18 overseas sorting centers, over 40 overseas warehouses, and cross-border logistics warehouses exceeding 3 million square meters. For trunk transportation, Cainiao operates approximately 170 chartered flights and chartered space weekly, plus over 2,700 truck transportation routes.

Based on this infrastructure, Cainiao can provide customers with cross-border express delivery, global supply chain, and overseas local logistics services.

As business volume grows, Cainiao plans to continue densifying its global logistics network, such as partnering with collaborators to advance global trunk network expansion and leveraging AI technology development to further improve delivery times.

Faster delivery times and more reliable fulfillment represent cross-border logistics competitiveness, which Cainiao clearly understands. Each of the four segments mentioned above requires extremely high efficiency.

Located in Dongguan, Guangdong, Cainiao's Shatin sorting center is Cainiao's most automated sorting center. This facility began operations in September 2024, currently processing over one million packages daily with total delivery time improved by 20% compared to the previous generation sorting center, with fastest 4-hour outbound processing.

During on-site visits, when goods enter the sorting center truck by truck, the first step involves unpacking - breaking apart originally bundled goods for sorting. Most processes are primarily automated, but some segments still require significant manual labor, such as relabeling products.

The person in charge of Cainiao's cross-border logistics Dongguan sorting center told media that different regional operations have different requirements. Many packages have different shapes and export rules, making automated labeling difficult, still requiring manual supplementation. However, he noted this represents the initial stage of automation, with automation levels expected to increase further. Plans to introduce unmanned vehicles are currently under consideration.

It's worth noting that 80% of goods from Cainiao's Dongguan Shatin sorting center first arrive at Cainiao's eHub in Hong Kong, where through re-palletizing, security checks, and other processes, goods are sent to different destinations, processing over 100,000 tons of export goods daily.

Cainiao's Hong Kong eHub serves as the core hub for Cainiao's global intelligent logistics backbone network radiating globally. Its 4-hour aviation radius covers Asia-Pacific core markets, with high-speed products reaching global destinations within 72 hours.

Jianmin, Senior Manager of Planning and Solutions at Cainiao Hong Kong eHub's Smart Freight Center, told media that over 50% of air cargo in Cainiao's international business passes through this eHub located next to Hong Kong Airport.

As a cargo transit location, eHub operational efficiency significantly impacts cross-border logistics delivery times.

Mastering delivery times still requires technological support. In June this year, Cainiao fully deployed RFID (Radio Frequency Identification smart chips) at Hong Kong eHub, essentially giving each cross-border package a "digital ID card," replacing manual PDA scanning.

Through this technology, when goods pass through "card readers" installed throughout the warehouse, they can automatically and quickly identify "digital ID card" information and update current location and status information to the system in real-time. Processes including unloading, security checks, storage, palletizing, and outbound processing can all use these chips for product entry, significantly saving time. Cainiao's Hong Kong eHub package processing efficiency improves approximately 30% compared to traditional freight centers.

Additionally, Automated Guided Vehicles (AGV), Material Handling Systems (MHS) for air cargo, and other technologies increase eHub processing efficiency to varying degrees.

**Customers, Customers, Still Customers**

Whether based on Cainiao finding advantageous areas to focus on or maintaining consistency with Alibaba's new strategy, for Cainiao, the success or failure of focusing on globalization doesn't judge the past but whether it can find sufficient new customers to operate such a massive cross-border logistics network.

When answering media questions, Xiong Wei revealed that Cainiao's customers mainly include e-commerce platforms, brand merchants or major sellers on e-commerce platforms, small and medium sellers, and even individual buyers, with e-commerce platforms remaining Cainiao's primary customers.

For top-tier customers, Cainiao hopes to establish longer-term cooperation and provide customized solutions. Cainiao's network expansion and optimization have strong interaction and binding with these top customers' business plans.

Brand merchants and e-commerce sellers adopt more regional sales models combining online and offline approaches. He also mentioned that through acquiring 4PX, Cainiao significantly upgraded its customer matrix and structure in a relatively short time.

The stability and growth potential of Cainiao's customer structure cannot be separated from the trend of Chinese goods going overseas. Customs data shows that China's cross-border e-commerce import and export totaled 1.32 trillion yuan in the first half of this year, growing 5.7% year-over-year. Moreover, "product overseas expansion" is evolving toward "brand overseas expansion," further stimulating new cross-border logistics demand.

Xiong Wei analyzed that compared to domestic e-commerce's 40% penetration rate, most overseas countries have e-commerce penetration rates of only 10%-20%, with significant room for improvement.

However, logistics services trouble some merchants and platforms. For example, in Malaysia, some Chinese brands wanting to expand overseas first approach Cainiao and other logistics service providers with Chinese efficiency to understand local market policies, warehousing, and transportation issues, then formulate more detailed overseas expansion plans, including key issues like store establishment.

Cainiao continues expanding business accordingly. Early this year, Cainiao's tens of thousands of square meters overseas warehouse in Kuala Lumpur, Malaysia was only half full, but by July, it was completely full.

"Many more customers are queuing to cooperate with us," Bruce, head of Cainiao's Malaysia and Singapore overseas warehouses, told media.

Based on market demand, Cainiao plans to double the area of this Kuala Lumpur overseas warehouse. This warehouse serves multiple Chinese overseas brands and local fast-moving consumer goods customers, including a currently highly-watched Chinese trendy toy brand, with Cainiao primarily providing warehousing and store delivery services.

Xiong Wei also stated that increasing numbers of manufacturers and brands are establishing overseas production bases or opening offline stores, increasing cross-border supply chain demand, with particularly notable performance in automotive parts, fast-moving consumer goods, and trendy toys industries.

Beyond this, Chinese products' competitiveness is globally recognized, and overseas companies also hope to access Chinese export supply chains through Cainiao, bringing competitive Chinese products to overseas markets.

Xiong Wei told media that an overseas company with a market exceeding hundreds of billions of dollars cooperated with Cainiao seven or eight years ago mainly on technology cooperation, but now has reached comprehensive regional cooperation with Cainiao in cross-border areas - a three-dimensional, long-term partnership.

A global leading health product e-commerce platform has similar considerations. On August 15 last year, this company began cooperating with Cainiao, entering Cainiao's Hong Kong fulfillment center located at Hong Kong International Airport. Through Cainiao's Hong Kong fulfillment center, this company can serve not only the domestic market but also Southeast Asian markets, improving Asia-Pacific fulfillment efficiency.

Cainiao hopes to achieve deeper cooperation with more customers through such collaboration cases.

In Xiong Wei's view, overseas warehouses and supply chains represent very certain development trends, with increasing numbers of customers having strong demands for supply chain transformation and upgrading. This presents two excellent opportunities.

Chinese brands are primarily transforming export supply chains centered on China into global supply chains with supply chain centers in multiple world regions. Overseas brands may have already completed supply chain globalization but hope to enhance overall supply chain digitalization capabilities.

Based on years of continuous investment in cross-border logistics networks, Cainiao hopes to capture these various market opportunities to support effective implementation of its globalization strategy. Simultaneously, Cainiao states it will continue investing in global logistics networks and further develop important markets according to customer needs.

However, these investments also present challenges. Xiong Wei stated that logistics network globalization requires long-term planning and substantial investment, but balancing large-scale investment with short-term business scale and returns represents one of Cainiao's challenges. Additionally, during globalization, Cainiao needs to balance unified deployment with localized teams. Third, in promising areas, Cainiao needs to make proactive investments, especially in special markets requiring very determined investment, which may attract different voices, but Cainiao needs to persist.

"From a capital investment perspective, Cainiao has entered a relatively stable stage," Xiong Wei stated.