February 25, 2014, 1:14 PM

China’s Alibaba ventures further into fulfillment and banking

The retailer launches a project to help solve logistics woes in the country and starts offering Chinese interest-bearing savings accounts.

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A hunger to keep learning and working on ways to drive e-commerce in China and beyond has fueled significant growth for Chinese e-commerce company Alibaba Group Holdings Ltd. The company, which was launched in 1999 by former English teacher Jack Ma with a lean staff of 18, today employs 20,000 workers across the globe. The company posted revenue of $4.89 billion for the first three quarters of 2013, up 60% from the same period in 2012.

Last year, Alibaba, which is well-known for its online marketplaces Taobao.com, designed for individual sellers and entrepreneurs, and Tmall, where larger brands such as Apple Inc. sell, helped create the Cainiao Network Technology Co. Ltd. The network aims to bring together a variety of companies to overhaul the scattered and inefficient fulfillment network across the massive country. Delivery woes are a major issue in China where there are no national carriers similar to UPS or FedEx in the U.S.

Cainiao means “Rookie” in Chinese. Alibaba and the other major shareholders in the company—including several Chinese carriers and e-commerce companies—say they chose the name to remind themselves to stay on their toes and keep innovating in order to keep online sales growing in China. Chinese online sales are set to grow from $294 billion in 2013 to $672 billion in 2018, a compound annual growth rate of 18%, according to Forrester Research Inc.

Beyond fulfillment, Alibaba is also exploiting the massive popularity of its payments system Alipay, which has amassed some 900 million accounts that consumers use to pay for products, services and bills both online and in stores. In June, Alibaba launched Yu’e Bao, an interest-bearing money market account that pays out between 6% and 7% in interest, compared with the standard 0.35% annual interest rates offered by conventional bank and checking accounts.

Yu’e Bao, which means “Leftover Treasure”, has accumulated nearly 50 million accounts, Alibaba says. The accounts are particularly popular with younger adults: The average age of a Yu’e Bao account holder is 28. From June through October, Yu’e Bao generated a total of about 1.79 billion yuan ($296 million) in interest income for all of its investors, according to Alipay. The average size of an individual Yu’e Bao account was 4,307 yuan ($712) as of Dec. 31. As of mid-January the fund swelled to more than 250 billion yuan ($41 billion), up 35% compared to with 185 billion yuan ($30.6 billion) as of Dec. 31, according to Alibaba.  3 million yuan is deposited into Yu’e Bao accounts every minute, Alibaba says, and the fund became China’s largest money-market fund in October.

 

 

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