E-commerce giant Alibaba Group Holding Ltd and its logistics arm Cainiao Network Technology Co Ltd are leading a $1.38 billion investment in Chinese courier ZTO Express Inc, to further boost the group's logistics capability for its New Retail concept in the highly competitive domestic market.

The deal, expected to close in early June, is a strategic investment for an approximate 10 percent equity stake in United States-listed ZTO. Other investors involved in the deal were not specified in the announcement.

Alibaba said Cainiao and ZTO will deepen their logistics cooperation amid the growth of New Retail, a business model envisioned by Jack Ma, Alibaba's founder and chairman. New Retail aims to seamlessly merge offline and online commerce and logistics via advanced technologies and data analytics.

"The continuing expansion of New Retail is catalyzing new opportunities and demands in logistics. This strategic investment will strengthen synergies across our mutual businesses to create new value and improved experience for merchants and consumers," said Daniel Zhang, CEO of Alibaba Group and chairman of Cainiao Network.

Under the deal, Cainiao and ZTO will focus on building up first and last-mile pickup and delivery capability, warehouse management, cross-border logistics and technology-driven smart solutions.

Lai Meisong, chairman and CEO of ZTO Express, said the growth of e-commerce and New Retail in China demands more efficient express delivery and expanded logistics services.

"This partnership will enable us to expand our selection of high-quality service offer-ings both in China and internationally, and is fully aligned with our common interest in improving logistics efficiency and enhancing customer experience," Lai said.

According to Ma, China's courier sector is set to handle 1 billion parcels per day in the next five to eight years, but few firms have developed the capacity needed to deal with such vast amounts.

China's smart logistics market is projected to grow fivefold to 1 trillion yuan ($155.72 billion) by 2025, a new segment set to drive the next phase of growth in the world's largest logistics market, which hit 11 trillion yuan in 2016, said He Liming, head of the China Federation of Logistics and Purchasing.

He Wei in Shanghai contributed to the story.