Shipping Disputes on Alibaba’s Parcel Delivery

Alibaba Group Holding Ltd. was accused on Friday by its delivery partner, SF Holding Co., in an exchange filing of eliminating SF as an option in shipping and hindering access to important data. The company, known as Cainiao, being backed up by Jack Ma, Chinese richest man, claimed that it was SF that first unenclosed information it needed to get parcels to customers.

It remains unclear what started their dispute, which might break the mutual relationship that fortified SF’s listing this year.  Cainiao, which Alibaba’s part-owned, hinged on services like SF Express, the country’s largest delivery business, to have parcels get to customer’s doorsteps. But the dispute is becoming serious that even the postal bureau of the country, which also regulates the industry, encouraged both companies to resolve the problem as early as possible to evade the market from getting into disarray. The problem may have started over a desire to manage the valuable customer data generated through the  millions of orders and deliveries that drift through the huge e-commerce operation of Alibaba.

A Shenzhen-based analyst at Morningstar Investment Service, Marie Sun, said “The heart of this conflict revolves around how Cainiao wants access to SF’s data and SF getting more reluctant.”

“SF probably wants to maximize its own interest and, in the short term, it has options to work with other e-commerce platforms.”

Cainiao and SF Express have been close affiliates in a parcel delivery business supporting China’s 6.2 trillion yuan online retail market.

“We are surprised and disappointed by SF’s abrupt action to stop providing the information that is necessary for the smooth completion of parcel deliveries,” Cainiao said.

“To protect more than a million of consumers and merchants from potential parcel losses, we have no option but to remove SF as a delivery option on Cainiao’s network.”

While the postal bureau was urging negotiation, numerous Chinese businessmen are taking sides in the quarrel.

Richard Liu Qiangdong, the chairman and chief executive of Alibaba’s online shopping competitor JD.com and Tencent Cloud Computing, a unit of China’s largest social network operator, both said that he would support SF Express in this dispute against Cainiao.

SF shares were down 3.2% on Friday at 11:22 in Shenzhen. However, it said that the dispute would not affect its 2017 to 2018 net profit or its restructuring plan.

By 5:27 AM GMT-4, Alibaba Group Holding Ltd. added gains of about 1.23%, to $123.97. it opened in $122.82, with a session high of $124.00 and a session low of $122.26. Its market capitalization was 303.10 billion, its P/E ratio was 49.72.

Want to get updated on the latest news about the stock market? Subscribe now at Trade12. We will let you know the latest happenings about forex, commodities and economies.