Google will invest $550 million in JD.com as part of a strategic partnership between the companies, according to The Wall Street Journal. The deal will only net Google an approximately 1% share of the Chinese e-commerce company, but it will also see the two work together, leveraging the logistics capabilities of JD.com and Google’s technological expertise, according to a press release from Google. Additionally, JD.com will start selling through Google Shopping, allowing some of its products to be sold internationally.
This gives Google another retail partner as it builds its e-commerce profile. Google partnered with Walmart to sell its products through Google Express last August, and worked with the retailer again, along with the likes of Target, Ulta, Costco and Home Depot, when it tested its Shopping Actions program, making it easier to shop these high-profile retailers through Google. Adding JD.com gives Google more products to attract consumers with, an important effort as it competes with Amazon for product search.
JD.com gains another powerful backer that can help it battle Alibaba. As of Q1 2018, JD.com held about 25% of China’s business-to-consumer internet retail market share, falling behind Alibaba’s Tmall platform at a 60% share, according to Analyst.
The Chinese e-tailer already counted Tencent and Walmart as allies — Tencent is its largest shareholder at 18%, while Walmart has a 12% stake — with JD.com regularly working with both partners on various initiatives and investments. Google gives JD.com yet another strategic partner with deep pockets and technological capabilities that can help it fight Alibaba over China’s valuable e-commerce and retail markets — the country reached over $1 trillion in e-commerce sales in 2017.
The deal may help JD.com’s International expansion plans, especially its aspirations in the US and Europe. JD.com wants half of its revenue to come from foreign markets in 10 years. To accomplish this, the company is planning to be in every Southeast Asian country by the end of 2018, and is making inroads in the US and Europe. It may not need as much help in Southeast Asia since it’s already somewhat established there, but selling through Google would allow JD.com to meet American and European consumers on a familiar platform, which is key since many foreign consumers may not be aware of JD.com.
But the prospect of a US-China trade war could complicate JD.com’s expansion plans. With tensions rising between the two countries, and with the announcement of new tariffs from both sides, cross-border e-commerce may suffer because consumers and importers will face higher prices.
For JD.com specifically, this current climate is slowing down its US expansion. The company originally planned to enter the US market in 2018, but will now wait, CEO Richard Liu told CNBC. The partnership with Google could jumpstart its efforts, but it will still need to be ready to adjust to any new tariffs or changes that would affect its business.
Source: businessinsider.com; 20 June 2018