Google To Invest $550 Million In JD.com, Enters China’s Online Retail Space

Google’s primary consumer service, its internet search engine, is blocked in China because of the company’s refusal to abide by the country’s censorship laws, but the tech giant is entering the lucrative market of the world’s most populous nation through another route: ecommerce. Google is investing $550 million in the Chinese online retailer JD.com, the two companies said in statements Monday.

“We’re excited to announce a new strategic partnership with JD.com, one of the world’s leading ecommerce companies. As part of this partnership, we will invest $550 million in JD.com. We want to accelerate how retail ecosystems deliver consumer experiences that are helpful, personalized and offer high quality service in a range of countries around the world, including in Southeast Asia,” Karim Temsamani, president for Google’s Asia-Pacific operations, said in a statement.

The all-cash investment will be used by the companies to jointly develop “next generation retail infrastructure solutions, with the goal of offering helpful, personalized and frictionless shopping experiences,” JD.com said in its statement. The deal will also mean the Chinese company will join Google Shopping, where it will make select products available for sale to multiple regions around the world.

“This partnership with Google opens up a broad range of possibilities to offer a superior retail experience to consumers throughout the world,” Jianwen Liao, JD.com’s chief strategy officer said in the statement. “This marks an important step in the process of modernizing global retail. As we celebrate our June 18 anniversary sale, this partnership opens a new chapter in our history.”

Google’s decision to invest in the Chinese ecommerce space is based at least partially on the fact that the online retail market in Southeast Asia is expected to be worth $88.1 billion by 2025, its statement revealed.

The deal, made by Google and not its parent Alphabet, will give the tech giant a little over 27.1 million newly issued Class A ordinary shares of JD.com (less than 1 percent stake), at a price of $2,029 per share. That translates to $40.58 for its ADR listing on Nasdaq, which had closed 0.37 percent lower at the end of regular trade Friday, at $43.59. During after hours, it slipped another 0.32 percent.

JD.com already has some famous companies as investors, including Walmart, which also recently bought a majority share in India’s homegrown online marketplace Flipkart. Other investors in JD.com include French retail giant Carrefour and China’s sprawling conglomerate Tencent Holdings, which wants to rival Alibaba, the leader in the country’s ecommerce space.

Google is also rumored to be taking a small stake in Flipkart. The stock price of Alphabet climbed marginally, by 0.012 percent, during Friday trade on Nasdaq, taking the company’s market cap to over $790 billion.