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Business
Big Fight for Big Data
China's logistics industry is scrambling for more consumer information
By Deng Yaqing | NO. 24 JUNE 15, 2017
A SF Express worker scans packages at the Huangwu distribution center in Yantai, Shandong Province on November 9, 2016 (XINHUA)

Chinese delivery giant SF Express recently unleashed a battle for supremacy on logistics data and power when it entered into conflict with Cainiao Network, a smart logistics network under the e-commerce giant Alibaba Group.

On June 1, SF Express and Cainiao Network fell into ruthless recrimination, accusing each other of shutting down their respective access to data functions. As a consequence, packages delivered by SF Express on Taobao—a Chinese online shopping website operated by Alibaba—couldn't be tracked and checked by vendors and consumers, and all online shopping platforms owned by Alibaba removed SF Express from the list of logistics companies that were available to consumers.

What sparked this conflict? It started when SF Express claimed that Cainiao Network unilaterally disconnected Hive Box's data interface in the early hours of June 1 because Hive Box refused to offer its clients' privacy data and switch from Tencent Cloud to Alibaba's Alicloud network. Jointly owned by five Chinese courier companies including SF Express, Hive Box is a Shenzhen-based company that operates a network of self-service package drop-off and pick-up stations across China.

But Alibaba saw the events transpire in a different way. The e-commerce giant announced it was SF Express and Hive Box's unwillingness to coordinate with Cainiao Network's latest security update on logistics data that led to the dispute. Wan Lin, President of Cainiao Network said Hive Box had gathered Taobao users' information, including phone numbers, ever since the two companies started cooperating—exceeding the scope of reasonable activity and posing a severe security risk.

In the hope of guaranteeing the smooth shipping of perishable goods and safeguarding the interests of both vendors and consumers, the State Postal Bureau, the country's logistics industry regulator, finally stepped in to mediate the dispute between the two parties, pushing them to resume cooperation and data sharing on June 3.

Cainiao Network, a data system based on Alibaba's e-commerce business and built as a logistics platform, doesn't engage in delivery services. Instead, it is committed to providing courier companies with technological and system support, helping formulate service standards and organizing business alliances. According to statistics from Alibaba Group, in 2016, Cainiao Network handled 57 million packages a day on average, accounting for 70 percent of the total market.

Lu Zhenwang, an e-commerce expert, noted that the fight over customer data is the cause for the dispute.

The organization that has the most data will have a greater say and stake in the express delivery industry, Lu told National Business Daily.

A staffer works alongside the automatic track of a smart warehousing base of Cainiao Network in Guangzhou, Guangdong Province on November 9, 2016 (XINHUA)

Data matters

It's safe to say that Cainiao Network and SF Express jockeying for data is partly due to an overlap in their business.

SF Express is rapidly expanding its business scope beyond courier services. In the field of fresh food e-commerce, SF Express gathers strength by relying on its online platform and offline community outlets, while Cainiao Network has built fresh food warehouses and invested in fresh food e-commerce platforms such as Hema Fresh and Yiguo.

Besides that, SF Express' Hive Box and Cainiao Station compete with each other in handling the last leg of express delivery, which is a highly contested area for players that hope to provide consumers with a whole set of logistics services.

"Data will definitely become the core asset of courier companies," said Li Mingtao, head of the research institute of China International Electronic Commerce Center, in an interview with ThePaper.cn, who believes that SF Express is reluctant to share its most valuable asset, data, with Cainiao Network.

"If a courier company only focuses on providing delivery services, it should not care about data. However, if it plans to stretch into other related services, it would start focusing on consumer data resources," said Li.

According to a research note from Haitong Securities, logistic services, big data and capital are the three indispensable pillars of e-commerce and big data is the core of future competition.

"The confrontation between SF Express and Cainiao Network reflects the important role of big data. Analyzing big data to dig up consumption potential is the key to combining e-commerce with logistic services, information flow and capital flow," read the research note.

"For Alibaba, data sharing means an expansion of its existing business ecosphere, which allows it to exert a larger influence on China's supply chain, and for SF Express, data sharing means a faster upgrading of services," Yang Daqing, a research fellow with China Society of Logistics, told ThePaper.cn.

Collaboration needed

According to Cainiao Network's official website, the company aims to build a data-driven, socialized and collaborative logistics and supply chain platform. By November 2015, Cainiao Network had absorbed data comprising information on more than 70 percent of China's total express packages, thousands of domestic and foreign logistics and warehouse operators and 1.7 million delivery men.

On the other hand, Hive Box is devoted to ensuring full data sharing and monitoring of packages picked up and dropped off at its own platform, realizing the all-time availability of last-mile logistics services, and has achieved system integration among major courier companies. It has also allowed their users to place delivery orders online and realized the unified management of electronic waybills.

"By allying major courier companies, Hive Box is likely to become the top choice in the field of last-mile delivery in the future. Given that, Alibaba hopes all the logistics data of Hive Box is shared with Cainiao, not just orders between SF Express and Alibaba, but also those between SF Express and other e-commerce platforms and even non e-commerce orders. Otherwise, it will be quite hard for Cainiao Network to collect complete data sets and make its logistics information platform stronger," said Lu.

Both SF Express and Cainiao Network can feed off big data, but their focus should be differentiated according to their own business features, with the former zeroing in on package delivery and the later on the flow of packages, said Yang, noting that the two parties should coordinate their business scope and team up to build a larger logistics ecosystem.

"More supervision over the security of logistics information from the regulator is also needed," Yang said.

Copyedited by Bryan Michael Galvan

Comments to dengyaqing@bjreview.com

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