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Liu CEO and founder of JDcom smiles before ringing the opening bell at the NASDAQ Market Site building in New York
Image: Liu CEO and founder of JDcom smiles before ringing the opening bell at the NASDAQ Market Site building in New York. REUTERS/Shannon Stapleton

Google Invests $550 Million Into China’s JD.com

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Image: Liu CEO and founder of JDcom smiles before ringing the opening bell at the NASDAQ Market Site building in New York. REUTERS/Shannon Stapleton

U.S. tech giant, Google announced it will be making a $550 million investment into Chinese JD.com.

Both companies described this move as a strategic partnership to improve retail infrastructure.

Strategic Partnership

Google has announced its plans to enter into a strategic partnership with Chinese e-commerce giant, JD.com. The companies state that this investment is one component of a broader effort to improve retail infrastructure in several markets, including Southeast Asia.

The agreement will involve an investment of $550 million in exchange for over 27 million newly issued Class A ordinary shares of the company. The issue price of the shares was $20.29 each. This works out to the equivalent to $40.58 per American depository share based on the prior ten days’ volume-weighted average trading price. The e-commerce company has had its American depositary shares listed on the Nasdaq in its group company since 2014.

Working Together

The companies plan to combine their efforts to develop digital retail infrastructure. The goal is to improve the personalized online shopping experience. At the same time, the hope is to shrink friction in a spectrum of markets, including the massive Southeast Asian marketplace.

JD.com also stated that it plans to open up a range of its products to new markets such as Europe and the United States. This would be made possible through Google Shopping, a service consumers can use to search for products online and comparison shop among different merchants.

Partnership with Google means that retailers gain enhanced visibility to consumers looking for products online. Furthermore, the Google Shopping platform is meant to make it more convenient for consumers to actually make those purchases.

Competition for Amazon

Many online retailers feel that using this service helps them to gain the visibility they need to survive in an Amazon dominated environment. The shopping service helps to make sure that consumers will see product search results other than those of the marketplace giant.

The partnership with Google will also make it possible for JD.com to sell its products to customers outside of its own home country. This is particularly relevant right now when considering the current trade tensions building between the United States and China.

Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.