Chinese logistics shipping company Cainiao has a mission to get e-commerce purchases delivered anywhere in the world in just 72 hours (and within China in just 24 hours.) When CEO Lin Wan spoke with John Battelle on the Signal Stage in 2024, Cainiao, a subsidiary of Alibaba Group, had succeeded in getting a small package delivered anywhere in China in about two days for just 30 cents, a country that sees at least 400 million parcels delivered daily.
The company continues its push to deliver packages anywhere on the planet in three days, a mandate from no less than Jack Ma, Alibaba’s co-founder, who named the company. Cainiao, meaning “rookie bird” in Chinese, keeps everyone in a start-up mindset and hungry to improve, a directive Wan takes to heart.
“He made it so clear, there’s not much room to rephrase it,” Wan says. “So the only option for us is to make it happen.”
You can hear more from this conversation with Wan and Battelle in the video or read our lightly edited transcript below.
TRANSCRIPT
John Battelle
Let’s start with something that I’ve grown to truly appreciate, which is logistics. I know, super exciting, but it is, and to bring it to life, we have probably the superstar of global logistics to speak with, Mr. Lin Wan, the CEO of Cainiao. Now, please join me in welcoming Lin. Thank you for coming. You’ve been with Cainiao for-
Lin Wan
Slightly more than 10 years.
Slightly more than 10 years, and you had an interesting role prior to that, at a company that is probably more well known that we just heard from, Amazon.
Yes, I worked for Amazon for nine years in Seattle. Operations and logistics as well.
Director of Global Logistics for Amazon. But with Cainiao, you’ve managed to do something that even Amazon hasn’t been able to do, and we’re going to get into that. But I want to start with the basics, because I think it’s possible that many in our audience are not familiar with your company. Can you tell me a little bit about the company and kind of what its mission is?
Everything goes back to the Double 11 event of 2012.
For those who might not be familiar with it, it’s the biggest one day sale in China.
Yes, which is on the November 11. On that year, more than 100 million orders was generated in one single day on all the platforms like Taobao, Tmall. It was a huge success for the e-commerce. However, it was a disaster for logistics.
What order of magnitude more orders is it on one day than a normal day?
It’s like 20 times of the normal day for that one. But for some of the brands, they could be 100 times of the normal day. For example, P&G was extremely popular in China during the Double 11 event, so the sales could be 100 times of the normal sales. We mobilized all the partners, not just companies, but still we see backlog everywhere. A lot of consumers had to wait more than a month to get their parcel. So it won’t work, it was a wake up call for us. We realized logistics could be a huge bottleneck for e-commerce. If we don’t solve this problem, e-commerce won’t really continue to scale.
You did solve it. We’re going to run a short video, and then you can come back, because I think this video shows that you solved a few problems, so let’s roll it.
[Video]
Commerce is continuously evolving and is more digitalized than ever before. Cainiao was incubated within the e-commerce ecosystem fostered by Alibaba. We’re building a global smart logistics network, and relentlessly innovating to address complex e-commerce logistics challenges. Our technology capabilities and e-commerce insights distinguishes us, and enable us to emerge as a professional logistics service provider. Today, Cainiao is one of the leading cross border e-commerce logistics companies globally. We provide disruptive logistics solutions for the superior speed, cost and experience to support fast-growing cross-border e-commerce needs. With our standard express delivery services, we manage to cut down the delivery time between China and major global destinations from 30-to-60 days to 10 days, or even shorter, all at a cost of a cup of coffee.
In China, Cainiao offers innovative omni-channel supply chain solutions to tackle complex logistics challenges, enabling customers to manage volume surges that can increase by a 100-fold during major shopping festivals. All of these are made possible because we have established one of the world’s largest smart logistics networks manage and operate critical infrastructures in strategic locations worldwide, covering over 200 countries and regions. Our technology DNA is deeply embedded within every aspect of our network. With AI-powered smart planning and fulfillment, we can meet the evolving needs of e-commerce customers. We are dedicated to integrating artificial intelligence to optimize parcel packaging, route planning, digital recycling to effectively reduce carbon emissions. Looking forward, we are committed to continuous innovation with the goal of transforming the logistics industry and enabling a seamless e-commerce experience anywhere in the world, realizing 24 hours delivery in China and 72 hours worldwide. By doing so, we believe we will make it easy to do business anywhere and create better lives for the billions of individuals on our planet.
One of the things that that comes up in that video is that 24 and 72, one day and three days. As I understand it, you can already deliver a one kilogram package anywhere in China in a little over two days for 30 cents.
That’s correct.
That’s less than a postage stamp to deliver a package, and that must change all the possibilities on either side in terms of what kind of businesses can exist because of that. Have you seen that kind of transformation?
Definitely. Because, as I mentioned, if we don’t work on the largest problems, it could be a bottleneck. But if we can build the right infrastructure, right solution for that, it’s a huge enabler for the e-commerce business. We have seen that. Even though we talk about 100 million parcels on the Singles Day, that one day, but right now, every single day in China e commerce produce close to 400 million parcels. Every single normal day right now.
I love numbers out of China. They’re always jaw dropping. 400 million on a normal day.
On normal day.
What is November 11?
We don’t count that anymore. It’s 10 times more than that.
We’re talking about billions of parcels?
Yes.
And you handle that.
We have to handle that.
That’s why, as I mentioned earlier, we started Cainiao, six months after that Double 11 event, and with idea that, how can we focus on e-commerce and then leverage technology to solve the problem. That’s why, we have a very simple formula over here. We have been focusing on e-commerce because we believe e-commerce is quite different from the traditional requirements. For e-commerce, for logistics, you have to have high density, the spikes, and you have to have the tracking information on every single step, because consumer keeps asking, ‘Where is my puzzle?’ And you have to handle the return problems. There’s so many returns right now. How can you get a return experience seamless? It’s quite different. So we have been focusing on the e-commerce.
The other one, to solve this problem, you have to rely on technology. That’s the only way you can scale. That’s the only way you can create the solution, get better experience, better efficiency, and at the same time, get lower cost structure. Without that, there’s no way you can do that. One of the reason we can get to the 30 cents is because we have a large pickup and drop off network right now, enabled by our own technology, hardware, software. We are serving around 90 million consumers every single day, they come to our store pick up their parcel, instead of we deliver it to their home and we try to do that within 300 meters of every single consumer, so that they feel like the experience is on par with the home delivery. When they pick up their parcel, they can actually only take the product and they leave the packaging, we call the Cainiao Post, so that the next consumer coming in, they can you reuse the box for sending out a new parcel. So that makes the consumer feel that they’re actually doing something good for the environment, even though they order too many parcels, in my view.
This is the head of a logistics company complaining about too many parcels. Do you think that might come here at some point? What you just described, that experience?
We have been working on the cross-border e-commerce, logistics. Because we believe, if we can make the similar situation for the cross-border, we can duplicate what we have seen in back in China. I have example here. If you can go to next slide over here. Six years ago, we saw some of the merchants in China are doing the cross-border. They’re sending all over the world. For example, if you sending something to Brazil at that time, I remember normal time, it takes 60 days to deliver from China to Brazil. And it happens at that time, they have a World Cup in Brazil. It was delayed. So we have a warning, saying that it takes up to six months to get there. Basically, you order in spring, get in the fall. But still, people are still buying. We are so inspired by this, and we think, what if we can make that much faster? Because you cannot be serious if it takes six days or even longer to get it delivered.
We rolled out the new product called $5, 10-day delivery, because $5 is something like a cup of coffee. Everybody can afford a cup of coffee. If we can deliver something in 10 days, it’s not as good as UPS, FedEx or those Global Express, but they take $50 to deliver something fast. So we think with 10 days, it should be able to give certainty and matches the demand, and also $5 something the merchant can afford, it’s within their gross margin. As that happens, it actually matches with the demand very well. We were able to reach 1 million parcels every single day for the very first year. We rolled out that product. So later on, we rolled out the new product called $10 in five days. Just make it simple, because people are building trust and that they are wanting it getting faster. It’s not exactly five days. Actually it’s five work days, because we haven’t worked out the weekend thing yet. We are working on that, by the way.
We rolled that out to 14 countries already, so that we believe this will significantly improve the overall experience and will help the overall cross-border e-commerce growing exponentially.That’s the opportunity over there. In order to do that, we have to build the right the network for that. That’s why 10 years ago, we have started to keep building the network to support that, including the e-hubs. We have a e-hub in Liege, Belgium, which is right beside the airport runway, which we combine to create the air cargo terminal, customer clearance, sortation center, line operations all together so that we could have the most efficient operation with the best speed and the lowest cost. Then we add charter flights between the e-hubs, so making sure we have daily, or sometimes multiple flights every day, to connect the major gateways. Then we can make sure we have the most efficient and reliable network to deal with the right speed we designed for.
As, I understand it, you have a goal of sending packages anywhere in the world in three days for $3.
Not exactly. Our target is at the $10. When we graduate, we want to get that to the to the $7 range. That is the kind of the price a cup of coffee. Because, when we started the Jack Ma, he made two things. He gave us a very peculiar name, Cainiao.
Tell us about this. What does that mean?
Cainiao means rookie bird, in Chinese.
Rookie bird.
It’s a bird and it’s a rookie in Chinese. Because we are newcomer in logistics, and Jack thinks we should keep the day one mentality and keep learning and keep improving our experience. That’s the way. He also set a very clear objective for us. The objective is to achieve 24-hour delivery in China and the 72-hour anywhere in the world. He made it so clear, there’s not much room to rephrase it. So the only option for us is to just to make it happen. We are making progress, just we’re not there yet.
You’ve been quoted as saying, “The biggest barrier to globalization is logistics.” Can you unpack that for us?
It’s the same thing. Given our experience in China, if we can solve the largest problem, and the largest problem for cross-border and globalization is even way more complicated than domestic. There’s so many segments involved. There’s custom clearance, a lot of uncertainty. If we can solve that problem and make it, well, not exactly the same, but close to the three-day to five-day experience. Because it narrows the gap between domestic shopping and the cross-border shopping. I think that will really help all the small and medium merchants all over the world, not just in China. We see a lot of merchants in China selling globally, but we also see the trend that, for example, in a lot of the part of world, in Eastern Europe, in Turkey, a lot coming from Turkey, coming from Europe, Middle East, in Mexico, in United States as well. If we can have a network that can plug and play and so easy, so standardized, then we can enable a lot of the merchants that can sell globally. I believe it will be so different from what it is right now.
Listening to you I could have been at the Web 2.0 Summit in 2004 talking about the internet. This idea that you have a global market and that there’s no barrier between any particular destination, as long as everyone’s connected to the network. But this is for physical goods that have cost to them to move from one place to another. Many of those costs are logistics. How do you actually get it done? It seems to me, you’re creating an internet for physical goods.
That’s exactly the idea. I mean, right now, with the technology, all the transactions can happen online. Virtually all the payments have been solved. But for logistics, you have to build the physical delivery the flow through from end origin to the destination. So that’s, I believe, that’s the biggest challenge. Also, on the other way, is the biggest opportunity as well.
What differentiates the company? Can you tell us a bit more about your technology infrastructure?
You can see the technology structure we have been working on for the past decade, we have a three-layer architecture over there at the bottom, which is most importantly, the digitization. We believe that’s the key, because that’s the way your system, your network, perceives the physical world. That’s the way you can digitize every parcel, digitize every personnel, every vehicle, digitize every movement and process. That’s the most critical part, but it is a very challenging work to do, and it takes a lot of heavy lifting to do that. We have been working on that. We invest a lot on the IoT technology as well, in order to be able to collect the data, digitizing, and scale.
Then on top of that, we have the algorithm intelligence. With that data, we can make decisions. We can optimize the decisions in terms of the network topology, in terms of the routing, the batching, everything together. That’s the second layer. On top of that, is the automation. With the right decision, we have to execution. We want it to be reliable. We want to be reducing the human intervention so that we can be with certainty, more reliable, reliability. So that’s the three layer we have been working on.
There’s a couple examples in next slides. The first product we’re showing here is one of the rapid-based, the pallet shuttle. This is something we designed to be able to enable the brands to combine their online and offline operations together. Built in China right now for P&G, the online and the offline sales is about 50/50. It doesn’t make sense to measure them separately. You have to merge them. Then, how can you achieve the high-density storage and have the through-put for the Double 11 event, which has to be relying on the next generation of the robotics to solve that.
Also, as I mentioned, we invest a lot on the RFID as well, because that’s the technology we think will help us to collect all the information in the next steps. For example, every time I do a manual scan, it cost me 10 cents. That’s a lot, comparing the overall cost I have. So I have to find ways to reduce that manual work and use technology to collect all the data. And the last example is about the unmanned vehicle. We have been deploying out unmanned vehicle in the university campuses. We have around 600 of them. The students are super busy on everything else, so we want to deliver the parcel right to the dormitory right using the unmanned vehicle.
Starting early this year, many of the Chinese cities also lifted the restrictions on the unmanned vehicle for the open road right now. So we are deploying the unmanned vehicle into the open road, delivering from the sortation centers into our Cainiao post the pickup and drop off stations right now. We got really encouraging feedback from the couriers, because they said, even though the cost is about the same. But the feedback we got from the courier saying that for the drivers, they are not sure whether they are going to show up tomorrow or not. There’s a lot of no shows. It could be if there’s rain, snow. But for those-
They don’t call in sick.
As long you charge that last night, the rest show up next morning.
At some point they should be delivering Dominoes, is what I’m thinking.
We call them little donkey. We like to use animals. The unmanned vehicle is called the little donkey.
I feel like I just got a glimpse into the future, and unfortunately, we’re out of time, but I hope we can bring you back and see how things have evolved over the coming years. Thank you so much for being part of today.
Thanks for having me here.
