Google’s search for what’s next has it doubling down on shopping.
The Alphabet-owned tech giant’s $550 million investment in JD.com not only illustrates a renewed emphasis on connecting with consumers, but also promises to ratchet up tech tensions with Alibaba, Amazon and everyone else looking to get a piece of the e-commerce action.
Although the deal represents a less than 1 percent stake in JD, Morningstar analyst Ali Mogharabi described the investment as a “strategic move to further expand its reach in the Southeast Asia market, and possibly return its search and other services to China.”
Mogharabi said the connection could also help the U.S. tech company flesh out its product offerings on Google Shopping and give it access to more consumer data to boost the service’s demand and usage.
“This may also be another alliance or partnership for Google, when it comes to going up against Alibaba, which JD.com is also battling,” he added.
The investment is just the latest move in the game of retail thrones between the tech giants that is not only heating up, but going global — witness Walmart Inc.’s aggressive deal to buy control of Flipkart for $16 billion, nudging out Amazon and setting the two up to do direct battle for the e-commerce market in India.
Google is also contending with Amazon, a consumer goods search giant in its own right. Amazon has expanded well beyond e-commerce and is driving new categories — like voice technology, through its Echo line of speakers — while venturing deeper into retail, groceries, fashion and more.
For Google, which makes the Android mobile operating system, shopping and global expansion have become pivotal differentiators as gadget innovation has begun to plateau.
And Google’s focus now appears to be locked on the business of selling things. The JD.com deal could help build its shopping cred and capabilities, both abroad and at home.
The search giant added Style Match features to its Android camera this year and unveiled a shopping actions program geared toward helping Google Assistant users buy things like hand soap and aluminum foil. And just last week, it revealed a deal with French supermarket chain Carrefour that allows customers to buy products through its voice service.
Now, Google has also put itself in more direct competition with the Chinese e-commerce leader Alibaba by teaming with its arch rival.
JD, short for Jingdong, has become something of a belle of the investment ball. In 2014, Tencent bought a 15 percent stake in JD.com, bringing Tencent’s WeChat into the fold. And in 2016, longtime Google partner Walmart, sold its Yihaodian e-commerce division for 5 percent stake in the company — which ballooned to more than 12 percent last year. And the Beijing-based JD made its own global fashion ambitions clear with a $397 million investment into luxury marketplace Farfetch in 2017.
Both Google and JD.com described the transaction as part of a strategic partnership to bolster retail infrastructure in multiple markets, including the U.S., Europe and Southeast Asia.
“We stick with our partners long term,” a JD official told WWD. “With Tencent and Walmart, the partnerships have expanded significantly over time. We believe this is just the first step in our long-term relationship with Google. We don’t necessarily know exactly where it might end up, but having that commitment to each other makes everything easier down the road.”
Investment firm Stifel saw the move as an effort by Google to plant a stake in Southeast Asia. “This transaction will better-position Google’s retail efforts in the region,” said analyst Scott Devitt.
He noted the deal represents the tech company’s second major investment in Asia this year, referencing its $1.2 billion transaction for Indonesian ride-sharing company Go-Jek in January.
But the e-commerce giants in China don’t quite see it that way.
“This smells a little more like a strategy to get Chinese products into Google Shopping,” said a source with intimate knowledge of how China’s major players are reacting to the news. Speaking on condition of anonymity, the person told WWD that they aren’t worried about this development, particularly since there’s no detail about how the two companies will connect the dots between their logistical and back-end infrastructure and their existing ecosystems.
That could change in the future, the source allowed, but for now, they look at it as a curiosity more than a threat.
Indeed, it’s still early days in the Google-JD.com relationship, and there are numerous details that are yet to be worked out — including the specific products and categories, as well as the particular markets. Then there’s the fraught relationship between U.S. and China. The White House appears to be on the brink of a trade war, which could muddy the water.
When asked about its retail priorities, Google returned to its talking point about creating a “frictionless” shopping experience: “We are excited to partner with JD.com and explore new solutions for retail ecosystems around the world to enable helpful, personalized and frictionless shopping experiences that give consumers the power to shop wherever and however they want,” said Philipp Schindler, Google’s chief business officer.
It’s a theme Google often emphasizes as its main motivator. While that may be true, there’s likely a lot more to it than that.
Stifel’s Devitt pointed out that “the investment is being made by the operating unit of Google versus one of Alphabet’s investment vehicles.” The implication is that the move is more than just a hobby, but a key operational tactic.
If that’s the correct reading, it could mean that the company is looking to keep its tech dominance intact by using retail, effectively, as the glue.