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Written by Casey Hall, Sophie Yu, Helen Reid
BEIJING/LONDON (Reuters) – JD.com’s acquisition of British electronics retailer Currys will give the Chinese e-commerce giant the network of stores and warehouses it needs for rapid expansion in the UK and Europe. You will get it at a cheap price.
Analysts said JD’s interest in the struggling retailer, announced on Monday, is part of the Chinese company’s efforts to deepen its presence overseas as a counterbalance to weak demand and fierce competition in the domestic market. It is said that it supports this.
Among China’s major e-commerce companies, including Alibaba and PDD Holdings, Jingdong Market is the most dependent on the domestic market, contributing to its stock price hitting a record low last month. The company’s Hong Kong-listed shares fell 2% on Thursday.
The company’s “new business” division, which includes overseas divisions, had sales of 11.6 billion yuan ($1.6 billion) in the first nine months of 2023, compared with 17 billion yuan in the same period last year, which was only 1.5% of the total. . sale.
Alibaba’s international e-commerce business generated revenue of 75.2 billion yuan during the same period, accounting for 10% of total sales.
“Jingtocom is increasingly facing limits to its growth in the domestic market,” said Liu Xingliang, director of Beijing-based China Internet Data Center.
Currys shares soared on Monday after JD.com joined US activist investor Elliott Advisors in a takeover battle for the British electrical equipment group, but Elliott has already sold Elliott’s starting price of 880 million yen. Rejecting dollar bids.
Red Wheels, Currys’ largest shareholder, said on Tuesday it supported the board’s decision to reject Elliott’s bid, but made no mention of JD, which has not yet made a formal bid. Mr. Currys declined to comment on JD.com’s expression of interest. The union representing Curry’s employees did not respond to a request for comment.
JD.com declined to comment. He has until March 18th to declare his firm intention to make an offer to Currys.
No strong track record
Unlike its peer PDD, owner of the rapidly expanding cross-border e-commerce site Temu, and Alibaba, which operates international platforms such as AliExpress, Lazada, and Trendyol, JD has a small overseas presence and only recent initiatives. is mainly focused on building logistics networks. Rather than expanding into the offline retail space.
Acquiring Currys would give JD access to the electronics retailer’s 21 warehouses in the UK and Ireland, 800 leasehold stores in eight countries and product stock at deeply discounted prices.
“Even if that price goes up to $1 billion, it will cost a fraction of what competitors have spent to enter these markets, and they will have an established brand. ” said Jacob Cook. Co-founder and CEO of e-commerce consulting firm WPIC Marketing+Technologies.
Currys’ current market capitalization is £762.8 million ($962 million).
It’s unclear whether JD will liquidate Currys stores to focus on warehouses in line with its recent expansion. JD is gradually building its logistics network in Europe, and its real estate division acquired the country’s first 361,000 square foot warehouse in the UK in 2022.
The deal marks a shift by online specialist JD, which will spend hundreds of millions of dollars on marketing and branding to operate the brick-and-mortar company, which accounts for about a quarter of Britain’s 20 billion pound ($25 billion) electricity market. This provides a potential shortcut to establishing yourself without having to do anything. building.
But it also comes with risks.
“Curry’s will need to change to make it an exciting business, (but) JD doesn’t have a great track record overseas,” Morningstar analyst Chelsea Tam said. It added that it had shut down its e-commerce business in Thailand.
Currys has struggled to grow following a pandemic-era sales surge as high inflation causes consumers across Europe to tighten spending. The acquisition of Jingtocom could lead to lower prices for consumers given its purchasing power over manufacturers and brands, making it a winning strategy for other retailers with Chinese roots.
“Electronics is one of JD’s strongest categories. JD can leverage its brand relationships and competitive sourcing costs to provide Currys with more, better, and cheaper Chinese-made electronics. Maybe,” Tam said.
Jingdong’s logistics business operates nearly 90 warehouses overseas, and the company has promoted its logistics network as a tool to promote sales of Chinese products overseas.
The company also launched its own Temu-like platform in Europe two years ago to leverage its logistics network.
The Ochama platform, which sells everything from groceries and toothbrushes to smartphones and toasters, offers home delivery services from its warehouse in the Netherlands to 24 European countries and pick-up services in more than 650 locations.
Mr Tam said UK and European regulatory hurdles were unlikely to get in the way of JD.com’s Currys business, as electronics retailing was not a “sensitive industry”.
If successful, a successful Currys reboot could help JD become a major player on par with Amazon in the UK and Europe, and is well known in China as an operator who isn’t afraid to make things happen. This will enable founder Richard Liu to make a bold shift in gear. Big bet.
“Acquiring Currys would be Richard Lew’s boldest move yet,” said Jeffrey Towson, a partner at Techmort Consulting.
(1 dollar = 0.7919 pounds)(1 dollar = 7.1888 Chinese Yuan)
($1 = 0.7930 pounds)
(Reporting by Casey Hall, Sophie Yu, Helen Reid, Sarah Young; Editing by Miyoung Kim and Kim Coghill)
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