Chinese online retail giant JD.com, a regular competitor with Alibaba and others and a growing force in ecommerce across south Asia, is looking to gain an advantage on the competition with a $55 million investment that, it hopes, can help breathe new life into its logistics arm.
JD’s share price had risen by 24% this year so far
Source: Yahoo Finance
JD.com has spent $55 million for a 10% stake in Jiangsu Xinning Modern Logistics, a China-listed logistics firm that focuses on consumer electronics. That makes sense – JD has a powerful business when it comes to selling home appliances or “big-ticket” electronics. In a filing from this month, Xinning says that it will be working with JD Logistics, a weak segment in the company’s latest earnings release, to build a big data system that looks to “boost efficiency and cut costs by optimising matches between cargo and vehicles.” The digital solution should be dealing with 200,000 vehicles by 2020, and plans to eventually account for 2 million.
This focus on logistics is not a new one for JD. It maintains a powerful delivery fleet in order to differentiate itself from the competition, as it believes this results in a quicker, better and more reliable service for end users. That’s an approach that global ecommerce titan Amazon is fast coming to appreciate, building out fleets of its own all over the world.
As JD embraces fully connected digital solutions to optimise logistics efficiency, the company could position itself to take the lead over rivals, and brush away the one black spot on its otherwise highly successful business.
Disclosure
Dominion holds JD.com in its Global Trends Ecommerce Fund. Share price as-at 23 May 2019.
Author: Theo Leworthy
Disclaimer: The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Capital Strategies Limited or its related companies. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.
