If you have not noticed, a bombshell came hours ago: JD being invested by Google, to the tune of US$550 million.
There are some really interesting dynamics at play here.
Google has among the best user traffic in the world (ex-China), and JD has one of the best ecommerce supply chains for multiple categories. By joining forces, they get access to each other’s key strategic resources, theoretically making the deal very interesting.
This is especially relevant when in many Western markets, people already use Amazon instead of Google to search for products (in China people use Taobao instead of Baidu). Google needs to stop this trend, and what beats it than offering people a direct option to buy?
It is worth noting that Facebook, Google’s main competitor for ad dollars, is trying to achieve the same, as we have written plenty about – on their Southeast Asian ambitions.
Not right to dismiss
Of course it is easy (and tempting) to dismiss it as NOTHING. Ultimately US$550 million for Google is a small amount of money, and Alibaba has invested more than US$4 billion into Lazada alone.
However, it is worth noting that first, Alibaba’s US$4 billion is for almost full control of Lazada, and it was not invested at one go; also, Google has made fewer than a dozen investments with ticket size over US$100M (if you count all MagicLeap rounds as one).
In other words, this is a significant commitment from Google.
And who else can they work with at this scale? Amazon? Alibaba? Flipkart? Well, JD.com is the most logical choice.
Challenges with JD Central
Although it seems that JD.com is facing some challenges in international markets, notably with the Central partnership in Thailand, as we just wrote a few days ago.
While JD Central’s site has apparently been launched, without official confirmation, it is rumoured that the full launch has now been delayed again, to September.
Perhaps the most important thing, is JD Central’s shipping efficiency, and this is to be confirmed. Despite JD (in China) boasting automation and its ability to manage eye-popping shipping and processing volumes, our experts believe JD Central will take a long while to catch up.
At the end of the day – there are lots of challenges for JD to replicate the success they have in their home market; also Central does seem to have an upper hand in the partnership – ultimately their resources and market access can be perceived as more valuable than expertise and technology.
Google deal might not be the same, but
The partnership with Google, however, is different. Google does not run retail operations (and will probably not want to do so). That makes the two parties’ interests more aligned in the relationship.
That said, for the partnership to succeed, JD.com needs to be very smart and diligent in exploring different markets, setting up the local infrastructure (and team), dealing with customs, and navigating through the complexity of tax and other issues.
Whenever big partners come together, how to make sure a good working relationship at all levels is always a challenge. Fortunately as mentioned above, Google does not run retail operations, and their main benefit is traffic – as a result there isn’t much complex ops to coordinate at the working level.
Google aligning with Tencent
A final observation is: will Google deliberately or inadvertently align themselves with Tencent, JD’s main backer (and Alibaba’s arch-rival)?
That will make the dynamics in Southeast Asia really interesting: Tencent-Google Camp (which also includes Go-Jek) versus Alibaba-Softbank Camp (which includes Grab).
Amazon is probably still waiting for the right moment to enter big.
