JD.com invests US$800 million in last-mile delivery service to fill a gap in its community group buying strategy

JD.com will invest US$800 million in Dada Nexus, the operator of rapid delivery service JD Daojia, in the latest move by the Chinese e-commerce giant to establish a stronghold in the burgeoning community group buying sector ahead of a public listing of its JD Logistics unit in Hong Kong.

JD.com founder Richard Liu Qiangdong is leading a newly-established community group buying business, according to Chinese media, and this latest move shows the strategic importance of a sector that has become a key battlefield for Chinese internet giants from Meituan to Pinduoduo. Alibaba Group Holding, which owns the South China Morning Post, has also embraced the business model that allows residents in a community to buy groceries and other daily essentials in bulk at prices cheaper than what they would pay individually.

Analysts said JD.com is trying to maximise its logistics advantage by doubling down on Dada Nexus, which operates JD Daojia and Dada Now, an on-demand delivery platform, since fast delivery is critically important in the community group buying business. After the latest investment, JD.com’s equity stake in Dada will increase to 51 per cent.

With control of Dada, together with JD Logistics – which has 240,000 delivery workers and service crew and more than 800 warehouses across the country – JD.com will be able to speed up its deliveries. Separately, JD Logistics has filed an application to list its shares in Hong Kong.

“Our increased investment will facilitate the expansion of on-demand retail and delivery, as well as omnichannel collaboration,” Xu Lei, chief executive of JD Retail, said in a press release. “This will help further diversify our retail services [and] enable our partners, especially real economy enterprises … to accelerate their intelligent digital transformation to deliver faster, better and richer services for consumers,” Xu said.

Although JD Logistics has built an extensive network for local delivery service and a strong supply chain for groceries and home appliances, it needs to integrate resources and increase cooperation to effectively compete in community group buying with the likes of on-demand services giant Meituan, e-commerce platform Pinduoduo and ride-hailing firm Didi Chuxing.