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Alibaba logistics partner ZTO Express is cooperating with the French post office, La Poste, to launch an express delivery service from China to Europe as part of the e-commerce giant's overseas expansion.

But the mainland delivery firm's move into Europe, known for low prices and low margins, has raised eyebrows among industry observers.

ZTO Express said it had reached a "strategic cooperation agreement" with the French post office to launch the service.

"The efficiency of e-commerce and individual courier services between mainland China and Europe will be greatly enhanced, parcels can be delivered in four to five days," ZTO said, adding it would also provide insurance and full tracking for parcels, and arrangements for returning purchased goods.

It will be the first mainland Chinese private delivery firm to provide services to Europe.

ZTO Express is a partner of Alibaba's logistics project China Smart Logistics Network (CSN), also known as Cainiao, which is 48 per cent owned by Alibaba.

While Alibaba does not have an English website for its popular customer-to-customer platform Taobao, it has an English business-to-customer platform AliExpress targeting consumers worldwide. AliExpress has been using China Post Group's express mail service EMS and international delivery firms such as DHL and UPS for shipments from China to Europe.

"Courier fee charged by ZTO would be lower than those charged by the international delivery firms, as it is in Hong Kong," said a ZTO Express franchisee.

Tommy Lui, chairman of the Hong Kong R&D Centre for Logistics and Supply Chain Management, said the deal "would bring more competition [to the international express delivery market], and it tends to favour the Chinese delivery firms as they seem to have big pockets, as they don't mind if the return is low".

However, ZTO's move into Europe has led to doubts about how it could cover the high costs.

"Either they have very deep pockets, or they have already secured huge orders, for example, from HP or Dell for many years," said a senior manager from a big four international express delivery company. "The line haul cost from China to Europe is very expensive, and they have additional costs of ground operation [after reaching Europe]."

He said it would be more costly to deliver parcels to individuals, and doubted that the venture was sustainable.

The manager added that the dominant position of private Chinese delivery firms on the mainland, led by SF Express, was supported by huge e-commerce transaction volumes, while Alibaba's European market was still in its infancy.

This article appeared in the South China Morning Post print edition as: Alibaba partner launches Europe delivery service

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