Share buyback more important right now than acquisitions, says XPO chief
XPO Logistics has put its merger and acquisition file back on the shelf while it ...
Chinese e-commerce giant JD.com is set to expand overseas logistics operations, following a $550m cash investment from Google.
The two tech titans have formed a strategic partnership aimed at developing next-generation retail infrastructure in regions including South-east Asia, Europe and the US.
JD said this would be achieved by combining its supply chain and logistics expertise with Google’s technology strengths.
In South-east Asia, JD operates a mix of in-house and third-party logistics solutions, according to international communications director Lori Chao.
“We evaluate each market individually to determine the best approach,” she told The Loadstar. “In markets where the geography is more challenging, or the logistics infrastructure is less developed, such as in Indonesia, we have built our own last-mile capabilities.”
E-commerce in South-east Asia grew 41% in 2017 to reach $10bn for the first time, according to a Google-authored report, which projected the market would balloon to $88bn by 2025. It is now the world’s third largest internet region, with 330m users, which will jump to 480m by 2020.
The region is developing into a crucial battleground as JD and Alibaba look to extend their reach beyond China.
Like Alibaba, which spent $1bn to take a controlling stake in multi-country platform Lazada, JD is developing partnerships with local players. For example, it launched a joint-venture in Indonesia in 2015, and is due to begin trading under a similar partnership in Thailand next month.
In January, JD invested $44m in Vietnamese e-commerce store Tiki and, the same month, founder Richard Liu told Bloomberg JD would be in the Philippines and Malaysia by year end.
“As the first large-scale e-commerce company in the world to build its own in-house logistics network, and as the largest retailer in China, JD has significant supply chain management technology, infrastructure and know-how to leverage when entering new markets,” said Ms Chao.
She claimed JD provided a “higher level of service than any online retailer in the world by making same- and next-day delivery standard,” and JD planned to make this a global standard, she added.
“We may do that in part by providing it [logistics services] ourselves in markets we enter, and we will continue to open up our technology and services to other companies and industries that stand to benefit.”
In China, JD has built a huge tech-based logistics network covering 99% of the population. It operates 515 warehouses totalling 10.9m sq metres. Last-mile deliveries are made by 65,000 couriers using bicycles and three-wheeled electric vehicles, with 90% of deliveries made in 24 hours and 57% within 12 hours. A fully automated warehouse was recently opened near Shanghai, while drones are used to make deliveries in rural areas.
In February, JD raised $2.5bn by selling a stake in subsidiary JD Logistics, a move seen as coinciding with both Alibaba and Amazon’s strategy of boosting revenue by offering logistics services to third-parties.
As the company expands its overseas footprint, speculation is mounting as to whether JD Logistics will move into freight forwarding, or even follow Amazon into operating a dedicated air fleet.
Ms Chao said: “JD works with a number of partners across all modes for international freight forwarding. Our in-house logistics capabilities are currently domestic.
“Because we sell across many different categories, including perishables and furniture and other oversized cargo, we have uses for many different modes of transport and expand our use accordingly.
“We recently announced we will use rail to import products from Europe to China, for example. This will be used for some heavier items, while other types of products, like fresh food, will continue to be transported by air or other modes as necessary.”