After securing its first round of investment earlier this year of more than a billion dollars, Alibaba's logistics subsidiary Cainiao is having trouble keeping costs in line.
Cainiao Network, Alibaba Group Holding Ltd.'s logistics affiliate with backings from Singapore's GIC and Temasek Holdings, has seen losses expand nearly four times during the second quarter, Alibaba's quarterly results showed.
Cainiao recorded RMB227 million in losses during the second quarter, compared to RMB59 million during the same period last year and RMB94 million the prior quarter.
In March, Cainiao completed its first round of financing, reportedly at RMB10 billion (US$1.54 billion), led by GIC and Temasek, with participation from Malaysia's Khazanah Nasional Berhad and China's Primavera Capital Group.
The increase in losses was related to the division's share-based compensation, says a company announcement without further explanation. Cainiao is currently providing services for free.
Cainiao's platform enabled the delivery of an average of 42 million packages per day, which is made possible by over 1.7 million delivery and warehouse personnel and 180,000 delivery stations through Cainiao's logistics partners.
That equals around 15.3 billion packages a year, compared to 20.6 billion packages sent in 2015 in China.
"Cainiao partners with logistics companies. We work together with each side taking different responsibilities. Our principal is that we do what the delivery firms can't do or don't want to do," an unnamed executive told Chinese media.
What Cainiao has been focusing on include building a national warehouse network and providing an intelligent information structure to help logistics companies improve parcel delivery efficiency.
Cainiao has reportedly spent RMB20 billion (US$3 billion) on buying land for building warehouses in 14 Chinese cities. Its information platform connects over 3,000 logistics partners in China and abroad.
Cainiao has also established more than 300,000 pick-up stations where consumers can take delivery of online-ordered goods in more than 190 Chinese cities.