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JD

JD

JD.com in US$200m merger with China’s largest crowdsourcing delivery platform

PUBLISHED : Friday, 15 April, 2016, 8:03pm
UPDATED : Friday, 15 April, 2016, 8:03pm

Chinese e-commerce services giant JD.com is set to expand its online-to-offline (O2O) operations under a proposed US$200 million merger between its JD Daojia delivery business and Dada Nexus, mainland China’s largest crowdsourcing delivery platform.

Once the deal is completed this second quarter, Beijing-based JD.com will own 47.4 per cent of the combined business and a firm lead in low-cost O2O delivery services for retailers on the mainland.

Richard Liu Qiangdong, the chairman and chief executive of JD.com, said on Friday that the merger was “an important step forward in building a sustainable O2O ecosystem” for the company.

“JD Daojia and Dada’s businesses are highly complementary, with the companies sharing a deep commitment to providing fast delivery service and excellent user experience,” Liu said.

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HSBC analysts have estimated the total addressable market for O2O services on the mainland is 10 trillion yuan (HK$11.96 trillion), based on an online penetration of less than 5 per cent.

The burgeoning O2O services market connects people with various local services found via mobile apps. According to HSBC, the top three O2O categories on the mainland in terms of market size last year were travel, restaurants, and home services and housekeeping.

Jefferies equity analyst Cynthia Meng said in a report that JD.com management “views O2O as an extension of the company’s core e-commerce business as it creates higher-frequency, needs-based purchases on the mobile app, which later on may bring opportunities to sell other products”.

Nasdaq-listed JD.com, in which Tencent Holdings bought a 15 per cent stake in 2014, directly sells products from its own inventory, like Amazon, and operates online marketplaces where major brands and retailers sell their merchandise.

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JD Daojia, which was launched in April last year, delivers products from local supermarkets, convenience stores and other merchant partners to consumers within two hours of placing an order.

In its first 12 months of operation, JD Daojia has become the leader in China’s O2O supermarket delivery market segment, with more than three million customers in 13 cities, according to JD.com.

Since launching in June 2014, Dada has quickly grown to lead the mainland’s crowdsourced delivery market.

Dada’s network covers 37 mainland cities, with a total of 1.3 million registered delivery personnel who are crowdsourced online. It has recorded daily deliveries of more than one million during peak seasons.

Dada chief executive Philip Kuai and JD Daojia president Wang Zhijun will serve as the chief executive and president of the new company that will be formed after the merger is completed.

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“JD.com will leverage its advantage in logistics network as it competes with other players in the O2O business,” Jefferies’ Meng said.

She pointed out that JD Daojia saw “significantly higher repeat purchasing rate than [e-commerce platform] JD Mall” in the fourth quarter last year.

JD.com claims to have the largest fulfilment infrastructure of any e-commerce services provider in China. It currently operates a total of 213 warehouses in 50 cities. It also has 5,367 delivery stations and pickup stations in 2,356 counties and districts across the mainland.