Summit Research Discusses Alibaba's 'Last Mile' Strategy

In a report published Monday, Summit Research analyst Henry Guo analyzed

's "last mile" strategy in which the company deploys "Cainiao Pick-Up Stations" to increase its geographical presence and improve its logistical efficiency. After making a purchase on Alibaba, the consumer is required to choose a nearby pick-up station. When their package is successfully delivered, a mobile alert is then sent and the buyer needs to arrive at the station to acquire the package. Pick-up stations include convenience stores, supermarkets, post offices, newsstands and community offices. Alibaba boasts more than 20,000 pick-up stations in nearly 190 cities. The company announced in early June a new partnership with Best Express and YTO Express which will add an additional 10,000 pick-up stations. In addition, 500 pick-up stations were also introduced across 400 universities across the country.

's "last mile" strategy involves an in-house delivery team but the company recently deployed more than 1,000 unattended pick-up box stations in nearly 40 cities across China. Guo noted that large or bulky packages are still relying on human delivery. The company also offers two other delivery initiatives including Jingdong Bang (physical outlets in fourth tier to sixth tier cities) for large electronic appliances while Jingdong Home provides three mile delivery service in categories such as groceries, flowers and food.

Shares of Alibaba remain Buy rated with an unchanged $97 price target. Shares of JD.Com were not rated in the analyst report.