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Business deals

Alibaba to invest $685m in courier serving rural China

STO Express will help boost logistics network nationwide

An STO Express courier drives his cargo three-wheeler in Beijing. The company possesses a broad logistics network across China.   © Reuters

SHANGHAI -- Alibaba Group Holding will take a 14% stake in Chinese courier STO Express for 4.6 billion yuan ($685 million), as the country's top e-commerce company looks to strengthen its delivery service in smaller cities and towns.

STO has roughly 20,000 delivery centers nationwide and ranks third in package deliveries by sales in China. Alibaba aims to achieve delivery within 24 hours to all parts of the country.

The e-commerce leader said it also will work with STO in developing logistics technologies.

Cultivating customers in smaller Chinese localities has become crucial as e-commerce growth levels off in large cities like Shanghai.

Alibaba curbed costs by outsourcing delivery while it expanded operations. But the company faces more intense competition from No. 2 player JD.com and others like Pinduoduo, which touts low prices. And as the market matures, shoppers seek not only quality products at competitive prices, but also high-caliber delivery.

This makes the development of a logistics network that includes villages and outlying areas an urgent task. Chairman Jack Ma Yun has said Alibaba will invest 100 billion yuan in logistics and spend more if necessary. The company will build its own logistics channels and develop technologies in addition to investments in couriers.

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