JD.com in talks with Thai Central for $500m JV, partners Qihoo in China

JD.com
A sign of China's e-commerce company JD.com is seen at CES (Consumer Electronics Show) Asia 2016 in Shanghai, China, May 12, 2016. REUTERS/Aly Song/File Photo

China’s JD.com Inc is in advanced talks with Thailand’s Central Group to launch an e-commerce joint venture in Thailand with a planned total investment of $500 million, people familiar with the matter told Reuters.

The venture will help China’s second largest e-commerce retailer expand its overseas business beyond Indonesia and boost its presence in Southeast Asia where rivals Alibaba Group Holding and Amazon are ramping up competition with new services, such as a quick delivery service in Singapore.

Indonesia currently accounts for almost all of JD.com’s investments outside China, including an e-commerce platform and travel start-up, Traveloka.

JD.com plans to enter the Thai market later this year and use Thailand as a hub to service other countries in the region such as Vietnam and Malaysia, JD.com chief executive Richard Liu told Reuters in June.

The joint venture with Central Group, owned by the billionaire Chirathivat family, Thailand’s third-richest, will focus on e-commerce and finance sectors, one of the sources said. The deal has yet to be finalized as the companies are unable to agree on ownership terms, two sources said.

JD.com declined to comment on the joint venture and Central Group did not respond to requests for comment. The sources declined to be named as the talks are not public.

The joint venture will be another attempt by Central Group to penetrate the country’s fast-growing e-commerce market, after it purchased the Thai arm of online fashion retailer Zalora last year.

Thailand’s e-commerce market, valued at $900 million, is expected to grow 29 percent over the next 10 years, according to a report from Google and Temasek published in 2016. Major players include Alibaba-backed Lazada, Thailand’s CP Group unit Ascend and South Korea’s 11 Street.

The same report estimated that the e-commerce market in Southeast Asia, a region of around 600 million, will soar 16-fold to $88 billion by 2025.

For JD.com, the investment in Thailand would come after it ended talks last month to invest in Indonesian online retailer Tokopedia, which instead raised $1.1 billion from a group of investors including Alibaba, a separate source told Reuters.

Partnership with Qihoo to broaden sales channels

JD.com Inc on Thursday said it has reached a deal to sell goods through the popular browser, search engine and app store of Qihoo 360 Technology Co Ltd, as China’s second-biggest e-commerce firm seeks new ways of attracting users.

JD said it will share data with Qihoo 360 in a similar vein to partnerships with Tencent Holding Ltd, Baidu Inc and news feed app Toutiao, as it broadens sales channels to compete with Alibaba Group Holding Ltd.

Unlike its bigger rival, JD has invested heavily in storage and logistics leaving it struggling for profitability, adding importance to original means of winning customers.

JD partnered social media giant Tencent three years ago and revealed at the end of 2016 that success of the partnership in drawing users spurred later deals, such as with search engine provider Baidu earlier this month. Accelerating revenue growth has pushed its shares up 66 percent this year.

On a quarterly basis, 25 to 35 percent of new users come from its Tencent partnership, JD said this month – a number that rises to about 50 percent during the annual “Singles’ Day” sale.

JD said the latest deal will see goods from its e-commerce site advertised on Qihoo apps, and allow users to make purchases without leaving the apps. The arrangement is similar to previous deals where users can purchase goods through Tencent’s WeChat app and Baidu’s search, forum and mapping apps.

Qihoo did not respond to a Reuters request for comment.

ONE APP FITS ALL

China’s 700 million smartphone users are increasingly using a smaller number of apps, say app makers and analysts, creating pools of consumer data confined to a handful of tech firms.

“Chinese users don’t really like to go to different apps. They like to stay in one place to do everything,” said Paul Yan, who oversees JD‘s digital advertising and marketing business.

WeChat, for instance, unlike Western counterparts such as Facebook Inc’s WhatsApp, has its own ecosystem of internal mini-apps, including taxi booking, online shopping and payment system that is almost universally accepted in Chinese cities.

“Western users are accustomed going to different sites for different services,” Yan said. “Chinese users, they pick one place they trust and they want to do everything there.”

Reflecting the trend, over a third of WeChat users were active for over four hours a day in 2016, Tencent data showed, while Toutiao said the average user spent 76 minutes in its app. By comparison, Facebook has said its users spend 50 minutes on its site and messaging apps.

Reuters