China's second-largest e-commerce site JD.com announced on June 18 that U.S. tech giant Google will invest 550 million in its company, as part of a strategic partnership.
The cash deal comes amid heightened competition among the country's major e-commerce players - including Alibaba Group, VIP.com, and Secoo. JD.com has notably been ramping up its retail efforts in order to capture a share of the rapidly growing Chinese market. Google's game-changing move could be set to significantly boost JD.com's retail capabilities, impacting the Chinese luxury industry.
Google has been blocked by the government on Chinese internet since 2010, after an ongoing battle over censorship. Relationships are slowly improving, however, and last year saw the first revival of a Google service for users in China - Google Translate.
According to the recent press release, JD.com will benefit from "Google's technology strengths". While applying JD.com's traditional advantage in supply chain and logistics, the two firms will work together to "explore the creation of next-generation retail infrastructure solutions" to provide "personalized and frictionless shopping experiences".
With this latest deal, JD.com has demonstrated its ambition to challenge its biggest rival, Alibaba. Since 2016, Alibaba has been working to build a solid online and offline retail network in China, under what it calls a "New Retail" business model.
New Retail aims to create a seamless and entertaining shopping experience for consumers, combining aspects of physical retail spaces with the latest capabilities in digital technology. Alibaba has invested in a number of brick-and-mortar entities to complete its offline infrastructure, including Intime Retail Group.
JD.com has also started to launch high-tech powered pop-up stores in order to address the Chinese consumer's rising desire for innovation. According to a report by Chinese media outlet Jiemian, JD.com's "Joy Spaces" aim to provide a technological retail experience for Chinese consumers via offerings including a facial recognition payment system and "magic mirrors."
JD.com and Google's strategic new partnership is expected to increase the level of competition between the e-commerce players, in a move that is likely to be good news for luxury brands looking to sell in China. If the deal pays off, the luxury industry could expect to see both JD.com and Alibaba stepping up their efforts to acquire high-end brands to list on their platforms.