Aug 20, 2020|

JD Earnings: CSO Jon Liao on JD’s Investment Strategy


by Ella Kidron

JD has announced a handful of important investments recently in several categories across the business. On August 17th, during the call to articulate’s second quarter 2020 earnings results, CSO Dr. Jon Liao succinctly summarized the company’s investment strategy.

Dr. Liao said, “We are committed to investing in companies which are complementary in terms of scale, scope, capability and long-term business value to build long-term strategic value.” He added, “We will continue our strong investment in lower-tier cities, supply chain and infrastructure.”

On May 28th, the company announced a strategic investment in Gome Retail, one of China’s largest electronics chains. The cooperation between JD and Gome is a further deepening of the cooperation between the two sides after Gome’s official flagship store launched on earlier in the year. According to the agreement, leveraging both parties’ online and offline advantages over the years, the two sides will achieve more synergies and better supply chain integration, as well as resource sharing in logistics and installation services, and other business-related aspects such as financial services.

JD announced an investment in Li & Fung on July 31st. Li & Fung is a giant in global supply chain solutions, based in Hong Kong. According to the announcement, JD and Li & Fung will develop in-depth cooperation in digital supply chain and private label, among other areas. Li & Fung is a leader in global supply chain, and this partnership marks an important initiative in JD’s digital supply chain efforts.

Continuing its leadership in the home appliances space, in late July, JD also announced the completion of its acquisition of the remaining 54% of equity in 5STAR, which when combined with the previous 46% stake makes 5STAR a wholly-owned subsidiary. 5STAR is the largest home appliance chain store in China, only next two Sunning and Gome. JD and 5STAR have partnered since 2017, and became building 5STAR Omnichannel Experience Stores in 2018 in cities such as Luoyang, Hangzhou, Cixi, Wenzhou and more. On August 12th, at a press conference held in Nanjing to mark JD’s official ownership of 5STAR, JD announced a plan to open 20 JD E-SPACE experience stores in first tier cities by 2025, along with 300 home appliance flagship stores in prefectural cities and 5,000 stores in towns and villages. Importantly, the plan will further JD’s push into the lower-tier cities and expand Chinese consumers’ access to high quality goods and services.

As far as logistics is concerned, on August 13th, JD announced that it will enter into an agreement to acquire a controlling interest in Kuayue Express, an integrated express transportation enterprise specializing in “limited-time express service” in China for a total consideration of RMB 3 billion yuan (through a combination of acquiring existing shares and subscribing for newly issued shares of Kuayue Express). JD Logistics CEO Zhenhui Wang said in the announcement, “Collaborating with Kuayue Express advances our integrated supply chain management, technology initiatives and service expansion to third party merchants. We will leverage our respective advantages and the synergy the collaboration creates to enhance the client experience and increase overall supply chain efficiency for JD and society at large.”

On August 11th, JD officially completed its investment in China’s fourth largest convenience store chain, Xiamen Fook Chain Store Management Limited Company (Fook Convenience Store). The investment is JD’s first in the chain convenience store industry and is an upgrade of the company’s existing partnership with Fook. Leveraging the investment in Fook, JD plans to further expand the omnichannel strategy for its supermarket business. Fook will supplement’s online retail business, improve last-mile delivery, and increase user loyalty. The two parties will explore “e-commerce + convenience store” model initiatives, such as social group buying, O2O, omnichannel fulfillment and more.

As to the reason for the announcement of these investments at such a steady clip, JD CFO Sandy Xu explained, “There are quite a number of investments or acquisitions announced recently…simply because a lot of these investment activities were delayed because of the pandemic in Q1.” She emphasized that JD’s strategy in terms of M&A has not changed.