Google invests in Chinese e-commerce giant JD.com

Thought on a macroscopic level, e-commerce and online search look to be at different ends of the spectrum, the companies that power these ecosystems are very wary of competition from across the border – both literally and figuratively. Search giant Google is investing in JD.com, the logistics major from China in a well-orchestrated attempt to widen its territory outside the U.S. and into e-commerce.

Google has made an investment of $550 million in JD.com, making it one of the key stakeholders in the company’s fortunes. The e-commerce major valued at $58 billion is in a territorial fight with rival Alibaba, and is known for its ambitious initiatives in warehouse automation, overseeing the introduction of thousands of robots into its supply chain. It also has ventured into working with blockchain, looking to utilize the technology to create more transparency and visibility into its supply chain, as is evident with its participation in BiTA, the largest blockchain consortium of its kind in the transportation and logistics industry. 

In a joint release, Google and JD.com have mentioned that they “plan to collaborate on a range of strategic initiatives, including joint development of retail solutions in a range of regions around the world, including Southeast Asia, the U.S., and Europe.” The fusion of Google’s AI and data analytics strength with the precision supply chain ability of JD.com has the potential to power the future of logistics in China and beyond.

China is the fastest growing e-commerce market in the world, showing surprising gains in the last five years as its market grew to be 500 million people strong. As competition thickens, companies like JD.com and Alibaba are looking to remove the human quotient from their supply chain and replacing them with automated robots. The new Shanghai fulfillment center that JD.com has built stands testimony to this – the warehouse can ‘fulfill’ 200,000 orders a day and employs just four people, with their jobs reduced to servicing the robots that work in the warehouse.

Such is the extent of JD.com logistics prowess that the company is confident enough to provide same-day delivery across the length and breadth of China – as long as the order comes in before 11 AM.

Google banks on the robustness of its artificial intelligence and data analytics unit. For instance, DeepMind AI, a company that Google acquired in 2014, is helping Google reduce its data center electricity bill by over 40% by figuring out a way to improve efficiency and reduce emissions. DeepMind AI could be used to make automated warehouses more efficient – for example, it could provide robots with paths of least resistance to reach pallet racks spread across the warehouse floor, helping cover more orders than previously thought.

Apart from playing a crucial role on the backend, AI and machine learning can drastically improve the online shopping experience of customers. As a lot of brick-and-mortar stores shut doors, the onus is on the e-commerce companies to create an experience that not only provides customers with multiple options and fast delivery, but also mimics the sophistication of an actual storefront.

Virtual reality and augmented reality is changing the way companies interact with its customers, bridging the gap between reality and the virtual space. Recommendation engines on e-commerce websites utilize big data to customize the experience of its customers, imparting brand loyalty.

“This partnership with Google opens up a broad range of possibilities to offer a superior retail experience to consumers throughout the world,” said JD.com’s Chief Strategy Officer Jianwen Liao. “This marks an important step in the process of modernizing global retail. As we celebrate our June 18 anniversary sale, this partnership opens a new chapter in our history.”

In the end, it is in the interest of global businesses to have a presence in the largest e-commerce market in the world and Google is marching ahead through several investments in the country. This specific partnership with JD.com would compel it to rub shoulders with Tencent, the $500 billion Chinese search engine gargantuan which is the largest shareholder in the company. Surprisingly, there is very little animosity between Google and Tencent, having already signed patent sharing partnerships between them and also co-investing in a few Chinese startups over the years.

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