Spend money to buy another British e-commerce company? Domestic giants accelerate overseas expansion

Just after the Spring Festival, JD.com began to increase its investment in the European market, this time intending to acquire Currys, the leading retailer in the UK market.

In late February, foreign media reported that Chinese e-commerce giant JD.com made an acquisition offer for British electronics retailer Currys.

The news pointed out that JD.com has contacted Currys in recent weeks and held exploratory talks. On February 19, JD.com issued a statement on the London Stock Exchange saying that the evaluation of the acquisition of Currys is still in a "very preliminary stage" and does not rule out a cash acquisition offer for Currys' issued share capital. The statement pointed out that it is uncertain whether any offer will be made in the end, and the deadline for the offer is March 18.

As the news came out, Currys' share price continued to rise, closing at 64.2 pence per share on February 19 and reaching 66.5 pence per share on February 27.

JD.com's stock price has fallen by nearly 50% over the past year. In comparison, Alibaba's stock price has fallen by about 20%, while Pinduoduo's stock price has soared by more than 50% after the company aggressively expanded its cross-border e-commerce platform Temu overseas.

“JD.com is smaller than Alibaba and Pinduoduo in terms of global gross merchandise value, so it needs to show stronger growth than these two peers to revive investment interest in the stock,” said Catherine Lim, an analyst at Bloomberg Intelligence.

It is conceivable that at a time when Chinese cross-border e-commerce platforms such as Temu are sweeping the world, JD.com has to work harder.

In 2024, in the "life and death elimination match", every company is trapped in a given framework, and the size of the framework determines the strategic depth of the company. Cross-border e-commerce may create a breakthrough or lack the follow-up, and the industry is still exploring.

This year, the top e-commerce players have shifted their overseas expansion plans from "starting with excitement" to "attacking with surprise". JD.com is no exception. If it doesn't make great efforts to catch up, its growth opportunities will become fewer and fewer.

Acquired Currys and expanded into Europe

Currys is now one of the largest consumer electronics groups in Europe with a 130-year history.

Currys UK stores

In 1884, Henry Curry founded Curry Cycle Co, a bicycle manufacturing business. In 1927, the company floated on the London Stock Exchange and began selling toys, phonographs and radios. In 1984, the company was acquired by listed company Dixons Retail.

In 2014, Dixons Retail merged with Carphone Warehouse to become Dixons Carphone, the UK's largest technology retailer, selling consumer electronics such as mobile phones, headphones, smart TVs, etc. online and in physical stores.

However, after the rise of mobile Internet, Carphone Warehouse gradually lost the market, and in 2020, the company closed 531 independent Carphone Warehouse stores. In 2021, the company was renamed Currys.

In November 2023, Currys sold its Greek subsidiary Kotsovolos to Greek power company Public Power Corp for £175 million, and the transaction is expected to be completed in the first quarter of 2024.

Currently, Currys operates 301 stores in the UK with a market share of 24%; its subsidiary Elkjøp has 426 stores in Norway, Sweden, Denmark and Finland, and franchise businesses in Greenland, Iceland and the Faroe Islands, with a Nordic market share of 27%.

Five years ago, Currys' share price was 129 pence per share, and it has now fallen by half. The reason is that the competitive pressure from e-commerce giants such as Amazon continues to increase.

A former employee close to Currys said it was vital that Currys' product pricing was consistent with Amazon's, otherwise people would visit Currys stores and then order from Amazon on their phones.

Competition from online giants, coupled with the impact of consumer downgrades, led Currys to say last month that sales fell 3% during the key Christmas trading period.

Despite the challenges, Currys remains one of Europe's offline retail giants. In addition to JD.com, US asset management company Elliott Advisors made a preliminary acquisition offer of 62 pence per share, but Currys rejected the offer, believing it "seriously underestimated" the company's value.

According to foreign media reports, Elliott Advisors may make a higher offer, and the deadline is March 16. According to British takeover rules, JD.com must now make a formal offer before March 18, otherwise it will abandon the deal.

Zhang Zhouping, a well-known cross-border e-commerce expert, told us that Currys, as an offline retailer, can make up for JD.com's shortcomings in the offline market . "JD.com started out in the domestic e-commerce industry with 3C electronic products, which is also JD.com's advantage category. Currys, as a major electronics retailer in the UK, can effectively supplement JD.com's categories in the European and overseas markets, and also enrich JD.com's advantage categories."

Judging from JD.com’s actions, it still attaches great importance to the European market and has made a lot of efforts.

On February 1, JD.com's cross-border e-commerce export platform "JD Global Sales" announced that it will further expand to 24 European countries based on the five countries previously opened, namely France, Germany, Italy, the Netherlands and Spain.

According to JD.com's official website, JD.com Global Sales is JD.com's expansion from its original business of only serving consumers in mainland China to directly shipping selected high-quality products to Hong Kong, Macau, Taiwan and various countries/regions around the world, with the goal of enabling users around the world to buy JD.com's products.

At the end of January, JD Logistics announced that it had reached a strategic cooperation with Evri, one of the largest parcel delivery companies in the UK. The two parties will establish a close strategic partnership, integrate their service advantages in the field of logistics and supply chain, and jointly create two-way logistics services covering China and the UK, providing Chinese brands going global and overseas customers pouring into China with integrated supply chain solutions for traffic and logistics.

Evri has a history of more than 50 years. Its service network covers the UK and provides parcel delivery services to more than 220 countries and regions around the world.

As early as January 2022, JD.com's e-commerce platform Ochama, registered in the Netherlands, went online, covering multiple categories of goods such as food, fresh produce, household goods, electronic products, fashion, etc., and sold domestic supply chain goods to Europe through a self-operated model. Information shows that Ochama has covered 24 countries in Europe, including the Netherlands, Germany, and Belgium, which support offline self-pickup services.

ochama official website

Currently, Ochama has established more than 500 pick-up points in Europe and operates a 20,000 square meter warehouse in the Netherlands, which is powered by automated guided vehicle (AGV) robots to improve product sorting efficiency. All orders will be packaged in Ochama's automated warehouse in the Netherlands and then shipped to the final destination.

We learned from international students in Europe that last year, Ochama held promotional activities in many places in Europe, such as Germany, France, and Belgium, such as issuing coupons for 10 euros off for purchases over 49 euros and 10 euros off for purchases over 29 euros. International students like to buy some cost-effective domestic food, small appliances, etc. on the platform.

However, from the perspective of Ochama's back-end fulfillment, different situations may occur due to the cooperation with different express delivery companies in different regions. For example, some people's orders have not been delivered for a week, some people's pick-up points are unreasonable, and the platform's customer service does not respond in time. After some people cancel their orders, they can only get a refund one month later.

10 years of overseas business, but still not very popular

The last hot news about JD.com’s overseas expansion was in early 2023, when JD.com announced the closure of its e-commerce platforms in Thailand and Indonesia.

On January 30, 2023, JD.com’s official e-commerce websites in Indonesia and Thailand issued an announcement that it will cease services in Thailand from March 3, 2023, and will cease all services in Indonesia on March 31, 2023.

It is reported that JD.com deployed e-commerce business in Indonesia and Thailand in 2016 and 2018 respectively, basically replicating the domestic model. For example, in Indonesia, the "country of a thousand islands", JD.com's self-operated logistics JDL Express Indonesia has 11 warehouses, more than 250 delivery points and more than 3,000 internal couriers, serving more than 500 cities, with a peak number of employees reaching 4,600.

JD.com has been going global for 10 years. But compared with Alibaba, Pinduoduo and SHEIN, JD.com's overseas business does not seem to have much influence.

Zhang Zhouping pointed out that the first issue is the emphasis. "Although JD.com has been overseas for a long time and has previously laid out overseas markets, the results are not obvious. This is closely related to the emphasis it places on its overseas business. The overseas market is different from the domestic market. It must overcome multiple barriers such as culture, policy, and management to achieve success."

The second is the issue of personnel management. "The bumps and bruises in JD.com's overseas business are also related to personnel management. JD.com's overseas business has been accompanied by a revolving door of business leaders, and each change is a reorganization of the team."

JD.com Hong Kong and Macau Edition

In March 2014, two months before JD.com went public, Xu Xinquan, former president of Huawei's terminal e-commerce, took up a new position at JD.com as senior vice president of JD.com Group and president of JD.com Overseas Business Unit, responsible for JD.com's international market business.

In June 2015, JD.com launched the Russian site of JOYBUY, but shut it down six months later. In 2016, with the failure of the Russian market trial, Xu Xinquan left JD.com, and the core employees of JD.com International left one after another, and JD.com Overseas Business Department was merged into the JD.com Mall system.

After two years of unfavorable overseas expansion, JD.com began to frequently change its personnel. In August 2016, JD.com CEO Shen Haoyu was transferred to become the president of JD.com Group's international business. In April 2017, Zheng Xiaoming, the former senior vice president of LeTV, jumped to become the president of JD.com Group's international business. In January 2018, Yan Xiaobing, the president and head of the 3C electronics and consumer product retail business group, began to manage the global sales business department.

In June 2017, JD.com Australia launched internal testing and set up an office in February 2018, but 15 months later, in May 2019, the Australian office was closed.

In 2018, JD.com returned to Russia, but Russians were already accustomed to shopping on AliExpress.

In the past two years, JD.com has also made great efforts in Southeast Asia . In addition to building the above-mentioned JD.com Indonesia and Thailand sites, it has also invested in Indonesian e-commerce Tokopedia and Vietnamese e-commerce platform Tiki.

The frequent changes in the person in charge led to the chaotic management of the Southeast Asian sites, which had been heavily invested in. For this reason, in September 2019, Sun Shimin, who had served as a senior executive in many companies including payment platform PayPal, Singapore Telecommunications, Vietnamese e-commerce platform Tiki, and Indonesian shared travel platform Go-Jek, was appointed as the president of JD Southeast Asia.

In September 2020, Yan Xiaobing took over JD.com's international business in full. At the same time, he sorted out the international business and integrated it into three teams: cross-border, commercial logistics and local sites.

Two years later, in November 2021, Sun Shimin left JD.com; in December 2021, JD.com issued an internal announcement that Yan Xiaobing, head of JD.com International, retired and was replaced by Daniel Tan, head of JD.com International's supply chain business department, as acting head of JD.com International.

According to Thai government documents, JD CENTRAL, a joint venture in Thailand, lost about 1 billion yuan from 2017 to 2021. JD Indonesia also performed poorly in the Indonesian iPrice rankings, as local traffic was completely divided up by Shopee, Lazada, Tokopedia, Bilibili and Bukalapak.

In May and December 2022, JD.com Indonesia carried out two rounds of layoffs, with the layoff rate in December being as high as 30%, or about 200 people.

Not long after, JD.com’s Thailand and Indonesia sites simply ceased operations.

Deploy overseas warehouses and find a new way

As it is difficult for e-commerce platforms to expand overseas, JD.com has found a new way to strengthen its logistics capabilities overseas. Today, JD.com's overseas business mainly focuses on logistics and supply chain business.

As early as the Yan Xiaobing era, JD Logistics began to promote the global "networking plan". In 2021, it opened a number of freight routes including China-Thailand, China-US, and China-UK, and established bonded warehouses in the UK, Germany, the Netherlands, the Middle East, and other places, more than half of which are automated warehouses.

According to the financial report, as of September 30, 2023, JD Logistics has established overseas warehouses in 15 countries and regions including the United States, Germany, the Netherlands, France, the United Kingdom, Australia, the Middle East and Southeast Asia. Globally, JD Logistics already has nearly 90 bonded warehouses, direct mail warehouses and overseas warehouses with a total management area of ​​nearly 900,000 square meters.

In addition, through its subsidiary JD Industrial Development (JD Intelligent Industrial Development Co., Ltd.), JD has invested in and managed 20 logistics parks in Indonesia, with a total scale of more than 400,000 square meters, mainly distributed in core industrial logistics areas such as Jakarta, Cikarang and Karawang.

In June 2023, JD Logistics and Geopost, an international express company under France Post, officially signed a strategic cooperation agreement. The two parties will carry out in-depth cooperation in multiple fields of international supply chain logistics, create international express services covering China and Europe, and improve JD Logistics' fulfillment time in many European countries.

JD Logistics Overseas Warehouse

On June 18, 2023, the 20th anniversary of JD.com, Xu Ran, CEO of JD.com Group, said that in the next 20 years, JD.com's supply chain services will basically cover the world, "establishing supply chain infrastructure in economies that account for 80% of the world's volume."

Judging from the financial report data, JD Logistics has achieved good results. In the third quarter of 2023, JD Logistics achieved total revenue of 41.7 billion yuan, a year-on-year increase of 16.5%. Among them, external customer revenue reached 29.8 billion yuan, and the revenue share increased to 72%. During the period, JD Logistics' net profit reached 840 million yuan, a year-on-year increase of 89%.

However, in the logistics sector, JD Logistics' global market size is still not as large as that of global logistics giants UPS and SF Express. In terms of revenue, in the third quarter of 2023, UPS's comprehensive revenue was US$21.1 billion, equivalent to RMB 150.7 billion; during the same period, SF Express and Cainiao achieved revenues of RMB 64.6 billion and RMB 22.8 billion, respectively.

In fact, setting up overseas warehouses is an asset-heavy business. JD Logistics has opened up new possibilities for JD’s overseas business, but it is also a difficult and dangerous road.

When it comes to JD.com's financial report data, it is not optimistic. In the third quarter of 2023, JD.com's revenue was 247.698 billion yuan, a year-on-year increase of 1.7%, and its net profit was 7.936 billion yuan, a year-on-year increase of 33.1%. Xu Ran pointed out that the company's profit level has reached a historical high.

However, JD.com's revenue growth has reached a new low and is almost stagnant. After the domestic e-commerce market entered the stock era, the growth problem has become the sword of Damocles hanging over the heads of domestic e-commerce giants.

If it cannot grow its overseas business, the former e-commerce giant will hardly gain attention. Unfortunately, in the past 10 years, JD.com seems to have missed the window of opportunity to develop its overseas business. In its attempt to overtake others by using the logistics supply chain model, JD.com’s latecomer advantage has not yet emerged.