Leading tech giant Google, an arm of Alphabet Inc, announced that it will invest half a billion dollars in JD.com, which is China’s second largest e-commerce player.
Google will invest $550 million in cash into JD.com as a part of a strategic deal, according to the companies, which both issued a statement. In exchange of the investment, Google will be receiving over 27 million newly-issued JD.com Class A ordinary shares, coming at an issue price of $20.29 per share.
That figure is equal to $40.58 per American depository share based on the volume-weighted average trading price across the preceding 10 trading days. JD.com listed American depository shares in its group company on the Nasdaq in 2014.
The two technology companies stated that they would cooperate to develop retail infrastructure that can better improve and personalize the shopping experience while reducing the friction in a number of markets, which will include Southeast Asia.
For JD.com’s part, it stated that it planned to make a selection of items available for sale in places like the United States and Europe through Google Shopping, which is a service that lets users search for products on e-commerce websites as well as compare prices between different sellers.
In general, when retailers strike a deal with Google, the partnership gives their products more visibility while making it convenient for consumers to buy them online. For the tech giant, its shopping service is a crucial point to win back product searches from Amazon, maintaining its relevance in the voice-powered future of e-commerce.
The deal would open doors for JD.com to reach out to consumers outside China, especially amid the escalating trade spat between Washington and Beijing.
JD.com founder and chief executive officer Richard Liu stated in an interview recently that a trade war would be “horrible” and it would end up damaging a lot of American brands. He also stated that uncertainty at present gave the business a pause over its US expansion plans.
The Chinese e-commerce company is currently competing aggressively against Jack Ma’s Alibaba within China’s e-commerce market. Both Alibaba and JD.com have invested significantly in technology, retail, and logistics to win over consumers.
JD.com has been trying out and experimenting with drone delivery services to reach out to China’s rural consumers as they keep the logistics cost relatively low.
The e-commerce giant is also backed up by another major Alibaba competitor, which is tech leader Tencent. Tencent is involved in business areas such as social networks, digital payments, and gaming. It also operates WeChat, which is China’s largest social messaging platform.
JD.com’s partnership with Tencent enables it to sell directly to consumers through the WeChat app.
JD.com has also struck a deal with US retail giant Walmart in the grocery business. According to reports, Walmart opened a small high-tech supermarket in China where consumers are able to use smartphones to pay for items that are mostly available on its virtual store on the online platform JD Daojia, which is an affiliate of JD.com.