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Google to invest into JD.com to build more versatile retail infrastructure
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US tech giant Google announced on Monday an investment of $550 million in cash in JD.com, a Chinese e-commerce powerhouse. The deal would let Google acquire 0.93 percent of JD.com stocks with one year’s lock-up period.

The investment is part of a strategic partnership forged between the two companies, with a focal point on the US, European and Southeast Asian markets. They would join forces to develop more personalized retail solutions although no details are released yet, and JD.com plans to select groups of high-quality goods for selling outside China through Google Shopping, on which consumers could search for products, compare prices, and make payments easily.

The move is believed to be a major step in Chinese e-commerce player’s foray into the global market. Google Shopping is said to be an “anti-Amazon alliance”, with its partner ecosystem now including over 50 retailers and channel-distributors like Wal-Mart, Target and Carrefour.

In the Chinese market, JD.com has partnered with Tencent Holdings Limited, the arch-rival of Alibaba. Alibaba, a Chinese high-tech conglomerate, is the top competitor of JD.com in the e-commerce sector.

Now, JD.com could be accessed through Tencent’s extremely popular social networking app WeChat, and the visibility enabled by the popular app has brought JD.com good business. The so-called “e-commerce plus Internet traffic” model may be copied in the new partnership.

JD.com realized a net profit of 1.52 billion yuan in Q1, a record high, marking eight consecutive quarters of net profit growth. Meanwhile, the company’s signature “high-speed growth” has slowed down, with its sales revenue increasing 33.1 percent year-on-year. Alibaba reportedly achieved a much higher annual growth of 61 percent during the same period.

It is believed that the tie-up with Google is prompted by the pressure of stronger competition in the domestic market. JD.com had tried to develop product lines of dress and accessories considering the goods have high gross profit and repeat purchase rates. However, Alibaba had asked online shops on its platform to choose between it and JD.com. The strategy successfully thwarted the latter’s efforts to regain growth momentum.

Under the circumstances, logistics and overseas markets have become new potential areas of growth for JD.com. Richard Liu, the CEO and founder of JD.com, wrote in a public letter on Monday, “The cooperation (with Google) signals that our global strategy has set sail in a full-scale way.” In a February interview, Liu said the company is expected to enter the European market as early as 2019.

Logistics has spearheaded the initiative to go global. JD.com claimed its supply chain and logistics capabilities as the foundation for the partnership with Google. On the same day when the cooperation was announced, JD Logistics, an affiliate of the e-commerce company set goals to reach any place in the world in 48 hours. Currently, JD Logistics owns 110 overseas warehouses and is operating nearly a thousand international transportation chains.

Previously, Alibaba had claimed that its logistics arm, Cainiao, could make deliveries anywhere in the world within 72 hours.

Industry insiders generally think the Internet user base of Google and the e-commerce and logistics strength of JD.com both contributed to the decision to make the deal.

For Google, buying into JD.com signals its most recent effort to brave into the retail sector. Just a few days ago, the US Internet company set up a joint venture with French supermarket chain Carrefour to explore shopping scenarios assisted by voice-control technology.

In its cooperation with e-commerce companies, Google is responsible for driving Internet traffic and also offering shopping advertisements. However, the business model along with its position as the world’s top search engine is now being challenged by Amazon.

Mary Meek, a partner of KPCB, a venture capital company, released her famous Internet Trend Report on May 31, predicting that 49 percent of Internet users at present are using Amazon to search for products while only 36 percent would resort to search engines.

Google collaborated with retailers whose businesses are also affected by Amazon to launch the Shopping Actions plan this March.

Shopping Actions has some advantages over traditional e-commerce platforms. More like an online bazaar, users search for a product and they could get information on the same product provided on multiple platforms. The Google shopping service provides a cart to collect goods from all the platforms and enable a payment by Google Pay.

The model would transform Google from an advertiser and search engine to the next-generation builder of retail infrastructure. Competing with Amazon, Google needs to make sure its platform boasts more varieties of goods and more efficient logistics power. 

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