Google is investing $550 million in JD.com, China’s second-largest online retailer.
The strategic partnership will see Google’s investment rewarded with 27 million newly-added class A ordinary shares in JD.com, a less than 1% stake in the company. Beyond the cash investment, the deal will include the promotion of JD goods on Google’s shopping service and a mutually beneficial combination of Google’s market reach and analytical capabilities with JD.com’s expert ise in logistics and inventory management.
Both companies have strong reasons to enter a partnership with one another. Here’s why.
To beat their rivals
The partnership with Google will help JD.com launch a serious campaign to unseat Alibaba, China’s largest e-commerce site and JD.com’s biggest rival in Asian markets. Meanwhile, Google needs to win back product searches from American e-commerce giant Amazon if it hopes to stay relevant in the space. JD.com’s product range and Google’s market share will help both companies achieve their goals.
To bypass a trade war
Chinese and American companies alike are anxious about growing tensions between the Chinese and American governments over trade. The Google-JD.com partnership could help JD.com keep an open channel to the U.S. And would give Google a foothold in China, where it’s had trouble conducting business as most of its services are blocked because it won’t censor results.
To go global
Trade war or not, Google and JD.com desperately want to gain traction in each other’s markets. Google is increasing its investments across Asia, including a rumored deal to invest in the Indian e-commerce company Flipkart. Global markets are also core to JD.com’s strategy to take on Alibaba, which mainly caters to domestic Chinese audiences.