2011-01-20 06:39

Chairman and chief executive of Alibaba Group Jack Ma speaks at a news conference in Beijing, January 19, 2011. [Photo/Agencies]

BEIJING - Alibaba Group, China's largest e-commerce firm, and its financing partners plan to spend up to $4.5 billion setting up a network of warehouses across the country to tap a growing appetite for online shopping.

The $3.0 billion to $4.5 billion investment will be made over three to five years and will be aimed mainly at building warehouses and also supporting logistics firms, the company said on Wednesday.

Sources told Reuters in October that Alibaba Group was planning to expand its logistics network to reach 52 cities in two years from 20 cities currently.

"This investment will help give clients some reassurance that the things they buy will not be damaged by a third party along the way, and will help improve client stickiness to the Alibaba platform," said Victor Yip, an analyst at UOB Kay Hian in Hong Kong.

Jack Ma, the charismatic founder of Alibaba Group, in which Yahoo Inc owns a 40 percent stake, believes that China's logistics market is fragmented and customer service for goods bought on the Internet could be improved.

"Hopefully within 10 years' time, anyone placing an order online from anywhere in China will receive their goods within eight hours, allowing for the virtual urbanisation of every village across China," Ma, chairman and chief executive of Alibaba Group, said.

Of the 30 billion yuan ($4.5 billion) investment, 10 billion yuan will be Alibaba's own money, the company said on Wednesday.

Part of the investment may be made via a fund to be set up with private equity and venture capital firms, Alibaba executive vice president Ming Zeng said.

Barriers

China's e-commerce market was worth 119.1 billion yuan ($17.93 billion) in transaction value in the second quarter, of which Alibaba unit Taobao, a consumer-oriented shopping website, had a 75.2 percent market share.

With about 30 percent of China's 420 million strong Internet users shopping online, logistics is one of the biggest barriers to e-commerce.

"All these bottleneck (issues) is because e-commerce in China is growing too fast and exceeds the physical capacity of logistic companies...it's actually a great opportunity " Alibaba executive vice president Ming Zeng told a group interview.

Taobao, which handled online transactions worth around 400 billion yuan ($60.77 billion) in 2010, will look to provide value added services in logistics, an Alibaba executive said. Taobao's daily orders could reach 20 million in 2012, up from 8 million currently, Ma said.

Taobao has had informal talks with banks about a possible IPO, two sources familiar with the situation said in December.

Chairman and chief executive of Alibaba Group Jack Ma speaks at a news conference in Beijing, January 19, 2011. [Photo/Agencies]

But the firm's chief financial officer Daniel Zhang said on Wednesday there was no plan for an IPO, for now.

Several Chinese dotcom firms, such as Dangdang.com and Youku.com -- China's answer to Amazon.com and YouTube -- made strong trading debuts in New York over the past few months.

Alibaba.com, the listed unit of the group, ended 1.05 percent lower while the benchmark Hang Seng index's gained 1.1 percent. Alibaba announced its investment plans after the market closed.

Shares in Alibaba.com, which competes with Global Sources Ltd in China's 1.7 billion yuan business-to-business online sector, have gained about 20 percent since the start of the year, surpassing the Hang Seng's 6 percent gain.