Bottom line: Alibaba may have to tone down its aggressive style of data collection from its business partners following a tiff with SF Express, but its business won’t face any major impact.
A conflict involving leading courier SF Express (Shenzhen: 002352) and Alibaba’s (NYSE: BABA) Cainiao logistics arm was all over the headlines at the end of last week, in a clash of titans that saw the pair suddenly sever their business relationship. At the center of the issue was data, and Alibaba’s near obsession with getting its hands on every piece of data possible as it tries to build up a big data empire.
But just as quickly as it consumed the headlines, this particular clash appears to have been resolved with some mediation by the government. There are a number of lessons in all this, but the biggest seems to be that Alibaba will need to rein in its bullying tactics that it wields by virtue of its huge market dominance. Otherwise it could face the wrath of companies like SF Express, and ultimately a commerce regulator that might decide the e-commerce juggernaut is unfairly abusing its near monopoly on the market.
The story began when SF Express suddenly announced late last week that it had severed its ties with Cainiao over a dispute about data sharing. (English article) To understand this story, we should quickly explain that Cainiao is a logistics provider, but that it uses mostly third parties like SF Express to provide delivery and other logistics services to the thousands of merchants that use Alibaba’s popular Tmall and Taobao online shopping malls.
SF Express is one of those third-party partners, and made its decision to cut ties after becoming unhappy at what it considered unreasonable requests for its data from Cainiao. The data in question involved Cainiao’s network of lockers place mostly in residential buildings, where couriers could place packages if recipients weren’t at home. The courier would then send a text message to the recipient with a code that could unlock the box, allowing customers to pick up their packages at their own convenience.
SF Express argued that data regarding that system, called Hive Box, was unrelated to its Caixniao relationship, and was angry that Cainiao was requesting the information. Cainiao fired back that it had never requested any data from SF Express that wasn’t related to its own Taobao and Tmall businesses. After reaching that impasse, the pair officially severed ties.
That caused a high degree of consternation at China’s postal regulator, which issued statements urging everyone to behave rationally. The reason it gave was concern that items like fruits could perish due to summer heat if they weren’t delivered in timely fashion. I suspect it was most worried about getting flooded by a huge wave of consumer complaints if the dispute lingered on, which is probably what would have happened. So it took the unusual step of hosting a mediation effort between the two sides, which resulted in a settlement over the weekend. (English article)
This kind of action by a regulator or other government body would be almost unthinkable in the West, and we honestly don’t see too much of this kind of thing in China either. But Beijing is extremely nervous about big disruptions like this, which is probably why the regulator took this unusual step. In the West, the government would probably be more likely to stand by and let the two sides work things out, unless of course it involved something like a major strike that threatened to cause major disruptions.
Some are painting the clash as a sort of David vs Goliath story, with SF Express as the David that took on Alibaba and won. This isn’t the first time that Alibaba has been hit with this kind of resistance to its sometimes bullying ways. I can recall one instance a few years ago when some of its merchants rebelled when the company made some unilateral changes that many believed were designed to kick them off the site.
This particular uprising also underscores the value that Alibaba sees in big data, which it certainly has plenty of due to the huge volume of business on its online shopping malls and also from its affiliated Ant Financial. At the end of the day, the company will probably need to back off from its aggressive collection of data from its business partners, and only collect what is really reasonable. I doubt this tiff will have any real long-term implications for the company, but perhaps it will force Alibaba to tone down its aggressive ways, at least for a little while.