Online retailer JD.com said on Thursday that it will buy $100 million worth of convertible bonds in Gome Retail, one of China’s largest physical electronics chains.
Why it matters: Chinese online retailers are working closely with physical electronics chains to expand their offline presence and product categories as well as complement their supply chain networks.
- JD and Gome have been considered competitors as both have core competencies in consumer electronics.
- JD’s investment in Gome Retail comes shortly after its rival Pinduoduo invested $200 million worth of convertible bonds in the Hong Kong-listed electronics chain in April.
- Another Alibaba vs Tencent alliance is taking form: Both JD and PDD are backed by Tencent and Alibaba is a major backer of Suning, another major electronics chain.
Details: JD and Gome Retail said in a joint statement on Tuesday that they are entering a strategic partnership for all-inclusive cooperation that ranges from service efficiency improvement to supply chain capabilities and financial services development.
- Foreshadowing the partnership, Gome Retail launched their flagship store on JD in March.
- Gome Retail is the latest addition to JD’s investment portfolio, including electronics chains such as 5Star, D.Phone, and Lenovo‘s Lecoo.
- Both Pinduoduo and JD invested in Gome Retail through convertible bonds, which is a “very smart way” for them to test out such investments, according to local media citing an investor.
- They can either hold the convertible bond or convert them to Gome shares depending on the effectiveness of their partnerships as well as the company’s future performance, according to the investor.
Context: NASDAQ-listed JD is reportedly gearing up for a secondarily listing Hong Kong as early as June.
- Alibaba invested $4.6 billion in Gome rival, Suning, in 2015 to facilitate a range of collaborations.
- To expand its online traction, JD on Wednesday teamed up with short video app Kuaishou in a deal that allows Kuaishou users to buy JD products without leaving the app.