JD.com Buys 9% of Electronics Distributor to Prepare for Regional Campaign
JD.com Inc. has agreed to buy a 9% stake in a domestic electronics distributor, deepening its offline and regional presence amid fierce competition in the e-commerce sector.
The share purchase deal with Beijing Digital Telecom Co. Ltd. would cost JD.com HK$214 million ($27.4 million) and would be paid in cash, according to a statement from Hong Kong-listed Beijing Digital Telecom.
The two companies will do business together in areas such as finance, logistics and cloud services, based on each other’s advantages, JD.com said in a separate statement (link in Chinese).
Nasdaq-listed JD.com is China’s second largest e-commerce company after Alibaba Group Holding Ltd. The deal with Beijing Digital Telecom comes as it grows its offline presence and seeks to enter lower-tier cities, pivoting from a traditional focus on big cities like Beijing and Shanghai.
Founded in 2001, Beijing Digital Telecom mainly sells electronics and home appliances, including smartphones for top brands like Apple, Huawei and Xiaomi.
As end of 2018, Beijing Digital Telecom had 1,600 stores — including franchises — in 22 Chinese provinces and four provincial-level cities. The company said it was seeking to increase its footprint in smaller cities and rural areas in its 2018 annual financial report.
This strategy echoes that of JD.com, which has increasingly eyed regional areas due to market saturation in bigger cities. JD.com has already added a group-buying option for customers, who are encouraged to recruit others to order in tandem to unlock discounted prices.
That model was pioneered by rival Pinduoduo Inc., which rose to become China’s third largest e-commerce platform within four years by focusing on users in regional and rural areas. The rise of Pinduoduo increasingly poses a threat to sector heavyweights JD.com and Alibaba.
For the first quarter of this year, JD.com’s profit rose 387% to 7.3 billion yuan ($1 billion) on revenue of 121 billion yuan. On Monday, its shares closed down about 1% at $32, giving it a market cap of $53 billion.
Contact reporter Mo Yelin (firstname.lastname@example.org)
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