Alibaba on Tuesday unveiled offerings aimed at allowing buyers and sellers on its business-to-business platform to instantly add supply chain finance services and logistics, the latter via an integration with the logistics software provider Freightos.
The products address two major demands from participants in Alibaba’s ecosystem, which competes globally with Amazon and has seen a major increase in uptake in the North American market the last three years, company officials said in a briefing with the media Monday.
The Freightos connection will be of particular interest to small and medium-sized shippers that need assistance securing freight capacity and managing customs clearance for cross-border orders transacted on Alibaba’s website.
Shippers will be able to access a range of services, including ocean and air freight, as well as shipment visibility, via the Freightos marketplace.
Jamin Dick, head of North America supply chain at Alibaba, said the e-commerce platform’s advantage is in taking data from the transaction between buyer and seller and infusing it directly into associated logistics transactions.
“Digitization is what we’re focused on, so the information flows in a way that’s accurate, and doesn’t require redundant data entry,” Dick told JOC.com. “Our platform is built for that. What’s different about us, we’re helping with the trade itself, and that information is needed for the cross-border move. Traditional digital freight forwarding requires all that information at some point, so if you have that information at the beginning, it helps to keep end-to-end accuracy.”
A boon for Freightos
Providing the logistics engine for Alibaba’s buyers and sellers is a major endorsement for Freightos, which has built an array of tools in its six years of existence, from freight rate management systems, to air cargo quoting tools, to rate indexes produced in tandem with the Baltic Exchange. But the company has, at its core, sought to develop a viable freight marketplace for shippers and logistics services providers to transact, and its involvement in the Alibaba ecosystem is a stepping stone toward that broader target.
Dick said Freightos’ “open marketplace” jibes with the environment in which Alibaba customers are accustomed. “Instead of selecting one solution or one freight forwarder, we wanted to be able to give our customers a choice,” he said. “Alibaba is where they come to find the best products and manufacturers. What we thought would make sense is to bring a platform that would help them transition to procuring logistics, to make it easier to move from sourcing activity to booking freight, which has been often difficult.”
The Alibaba freight solution is not targeted at Fortune 100 companies that have internal teams that focus on international trade, Dick added. Instead, it is focused on small and medium-sized businesses “that are great at serving customers and sourcing, but aren’t great at Incoterms or trade compliance, to help them with logistics without them having to be experts in cross-border freight,” he said.
The trade finance solution, meanwhile, allows qualified buyers to take advantage of Alibaba’s financial might to help them preserve cash flow. The product enables sellers to be paid at the time of the transaction but allows buyers to delay payment for up to 60 days depending on a program that determines the buying and selling histories of the two parties, among other factors.
“They have access to the service based on all the usual credit quality checks, and we’re enabling that process digitally and in close to real time,” Dick said. “This is not a complex loan situation. It’s meant to be a quick process.”
Leveraging finance potential
Alibaba entering the trade finance fray will only bolster the idea that logistics and digital marketplaces can be leveraged to create financing opportunities for businesses that lack the access to credit and capital that large volume shippers have. A number of parties, from visibility companies to forwarders and container lines, are aiming to tether logistics data and shipment histories of buyers and sellers to open up more financing options for shippers.
Alibaba, in particular, can ramp up the number of small businesses able to tap into capital to keep cash on hand, an acute problem during the COVID-19 pandemic as stores have been shuttered and demand for certain products falls, the company said.
“We think of sourcing and logistics and finance as three crucial components that go well together,” Dick said. “They need help with logistics while sourcing and they also need help with finance options.”
John Caplan, president of North America and Europe at Alibaba.com, added in a statement that “this is possible for Alibaba.com because we know the buyers and sellers on our platform, and financing is offered for transactions that we know are real.”
Caplan, in the briefing Monday, said Alibaba.com sees the global B2B e-commerce market as being nearly $24 trillion, six times the value of the business-to-consumer e-commerce market. He said the United States is its largest buying market for B2B transactions, with the overall Alibaba.com platform growing 17 percent, on a compound annual basis, since 2017.
The tools released Tuesday are intended to help those small B2B entities simplify processes with which they typically struggle, Caplan said.
Alibaba has tried to directly integrate ocean freight services through its marketplace before, via connections with a number of container lines and forwarders in 2017, but those options were confined to sellers in China.
Alibaba ramping up its presence in logistics and trade finance is also notable given Amazon’s own logistics ambitions. The Seattle-based online giant has established a US truck brokerage, started its own non-vessel operating common carrier (NVO) business, runs its own intermodal containers, and operates a network of air freighters and final-mile delivery trucks to support parcels sent by sellers on its marketplace. It also acquired a digital customs brokerage in fall 2019.
As far back as 2018, Ulrik Sanders, senior partner and managing director of Boston Consulting Group, told attendees at the JOC Container Trade Europe event that they needed to think of Amazon and Alibaba as threats. “Integrators are moving up the chain — they used to focus on last mile, but more and more are focusing on long-haul legs,” he said. “Customers [such as Amazon and Alibaba] are becoming competitors.”