Alibaba (BABA -1.16%) recently announced an agreement to invest $807 million to increase its ownership of Cainiao Smart Logistics Network Limited, its logistics affiliate. That move will bring Alibaba's ownership to 51%, and that's just the beginning: The company will also invest $15.2 billion over the next five years to bolster its worldwide logistics network to accomplish its goal of fulfilling e-commerce orders within 24 hours in China, and within 72 hours globally.

Both customers and investors stand to benefit from this move that will make Alibaba's business "stickier."

A man handles a box on a conveyor as it moves through a distribution facility.

Image source: Getty Images.

Investing in the supply chain to meet demand

An Alibaba-led consortium established Cainiao Network Technology Co. in 2013 to push the envelope within the Chinese logistics industry and get goods to their destination more quickly. Cainiao represented the next generation of logistics in the Middle Kingdom, focusing on an innovative platform that linked e-commerce buyers and sellers with multiple end-to-end options.

Alibaba operates Taobao Marketplace, China's largest mobile commerce location, and Tmall, China's largest third-party platform for brand names and merchants. Combined, they netted $547 billion in gross merchandise volume in the 12 months ended March 31, 2017. The company also owns AliExpress, its worldwide retail marketplace, with approximately 60 million annual active buyers as of March 31, 2017, purchasing directly from producers and suppliers in China. And last but not least, there's Alibaba.com, China's biggest global online wholesale marketplace.

In short, Alibaba is a big operation, and guaranteeing the timely delivery of millions of orders is no easy task. The company's size, combined with the relentless march of complexity in the global economy, makes this move not only a smart investment but also a necessary one. 

Forget inventory management: It's all about supply-chain management

Online retail is set to continue gaining ground on traditional retail. eMarketer estimates that retail sales will grow 5.8% to $22.737 trillion in 2017, fueled particularly by Chinese growth. In particular, retail e-commerce sales worldwide will increase at an eye-popping 23.2% to $2.290 trillion. Double-digit gains are expected through 2022, with China and the U.S. leading the way. In fact, China and the U.S. alone will produce over $1.58 trillion in e-commerce sales this year -- that's 69.1% of the total. Of note to Alibaba is eMarketer's estimate that mobile commerce will account for more than 70% of e-commerce sales in both China and India.
We should therefore expect companies like Alibaba and Amazon.com to invest even more in supply-chain management in the years ahead. It's simply a sign of the times. Even the U.S. Postal Service delivered a record 5.2 billion packages last year, up 15.5% over 2015's 4.5 billion, all while deliveries of old-fashioned mail continued their slow decline. 

Foolish bottom line

Alibaba is China's e-commerce leader, with revenue and earnings per share expected to grow 29% and 32.37%, respectively, per year through fiscal 2022, according to S&P Global Market Intelligence. Investors should take heart from the Cainiao move that management chas the situation well in hand, taking the necessary steps to satisfy the needs of all Alibaba stakeholders.