Google looks to e-commerce in partnership with China’s JD.com

JD.com controls much of the inventory sold on its e-commerce platform. Will the e-tailer eventually choose to control its airfreight operation as well?

Today, Google and JD.com announced a strategic partnership leveraging one another’s areas of expertise, to develop new e-commerce products and services for global markets, including Southeast Asia, the United States, and Europe. As part of the agreement, Google is investing US$550 million in Beijing-based JD.com, which will issue discounted Class A shares to the Silicon Valley tech-giant.

The partnership is illustrative of both a growing focus on cross-border e-commerce, and the tendency of dominant e-tailers in various regions to increasingly look beyond their home markets for growth. In May, Walmart announced its intention to acquire India’s Flipkart for $16 billion, ostensibly looking to fight Amazon for market share. Then, earlier this month, Alibaba announced a string of new investments  and air cargo supply chain partnerships aimed at improving cross-border e-commerce logistics efficiency.

For JD.com, optimizing its supply chain has long been a key component of its development strategy. Unlike online marketplaces for third-party sellers, such as Alibaba’s Tmall or eBay, the majority of the inventory moving through JD.com is controlled directly by the company. Greater control over its own supply chain has enabled JD to pioneer technologies aimed at improving forward stocking and product fulfillment capabilities.

Although the majority of JD’s logistics activities to date center around the Chinese market and optimizing domestic deliveries, this could soon change. In May 2017, JD.com spun-out a 3PL subsidiary, JD Logistics, which has since attracted more than $2.5 billion in investment capital from high profile investors such as Tencent, Hillhouse Capital, and Sequoia China. Many in the air freight industry interpret the expanding integrated delivery capabilities of JD Logistics, paired with JD.com’s growing volumes of imported perishables and fast-moving goods requiring air freight transportation, as a sign the company may eventually require dedicated air freight services.

Returning to Google, might the tech giant’s brand one day be associated with retail in the same way it has become synonymous with “search”? Google’s chief business officer, Philipp Schindler, said of the agreement, “We are excited to partner with JD.com and explore new solutions for retail ecosystems around the world to enable helpful, personalized, and frictionless shopping experiences that give consumers the power to shop wherever and however they want.”

 

 

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