Google signs China deal

By James Thornhill and Yoolim Lee

Google is investing $550m (€474m) in cash in China’s JD.com as the US company pushes deeper into online commerce. It will buy newly issued class A shares at $20.29 per share, the companies said in a joint statement.

The pair plan to explore joint development of retail solutions in regions, including southeast Asia, the US and Europe. The deal comes a week after Google struck an alliance with Carrefour to sell groceries online in France through the US company’s platforms including Home and Assistant.

The flurry of activity signals Google’s growing ambitions in ecommerce. The French partnership will allow consumers to order staples through Google services on their smartphones, tablets or other devices.

The latest deal is aimed at combining JD’s expertise in logistics and supply chain with Google’s technology to experiment with changes in how people shop.

“We are excited to partner with JD.com and explore new solutions for retail ecosystems around the world to enable helpful, personalised and frictionless shopping experiences that give consumers the power to shop wherever and however they want,” Philipp Schindler, Google chief business officer, said.

One of the draws for Google is that JD.com has its own logistics network, similar to Amazon.com. JD.com offers Google a more scaleable infrastructure than that of other China-based e-commerce monoliths such as Alibaba.

Retail is the biggest advertising area for Google, and the search giant’s spending on e-commerce is likely to increase. The partnership with JD.com represents Google’s push to develop a long-term defence strategy against Amazon’s ad-market with two main goals: to retain its strength in retail advertising, and to expand into a bigger addressable market.

The partnership with JD.com will likely serve as a benchmark for other retailers fighting against Amazon, as it will make it easier for Google to sell ad and cloud services and artificial intelligence tools down the line.

JD, which competes with Alibaba, came under fire last month by a hedge-fund manager, who called China’s second largest ecommerce operator overvalued and criticised its “silly” investments. Kok Hoi Wong, chief investment officer for APS Asset Management, said his own internal valuation for the $63bn company was “a tiny figure.”

- Bloomberg

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