Jing Dong’s further expansion in Southeast Asia

Jing Dong continues its expansion in the Southeast Asian market. Its partnership with Central Group will boost Thailand’s digital retail industry.

Editorial

The Jing Dong locomotive continues to pick up speed. On 15 September 2017, Jing Dong announced a partnership with Central Group. The two companies formed a joint venture in Thailand with a US$500 billion investment.

Jing Dong is China’s leading e-commerce operator. Central Group is the number one retail brand in Thailand. Its subsidiaries own shopping malls, department stores, hotels, supermarkets and restaurants. Central Group will provide half of the US$500 billion investment, Jing Dong will provide the other half. The partnership will deliver a new online shopping platform JD.co.th. Central Group will open multiple flagship stores on the platform.

It will create the first digital ecosystem in Thailand

The partnership will drive Thailand further towards a digitalised economy. Thailand government came up with the Thailand 4.0 economic model. It aims to turn Thailand into an innovation and tech driven economy.

“Thailand’s large population and developed infrastructure, including strong national logistics networks, give it tremendous potential for both e-commerce and fintech services,” said Richard Liu, Jing Dong’s Chairman and CEO. The two companies will establish the first digital ecosystem in Thailand. Jing Dong will provide the logistics solutions and technology. Central Group will bring a relationship local merchants.

Central Group was established 70 years ago. It now serves 14 million customers, has 10,000 suppliers and 50 million products. Jing Dong’s technology and Central Group’s customer base give the joint venture a promising future.

Source: e-shop world

The partnership will benefit both companies

About 70 million Thai citizens now have access to smartphones. The online retail industry is expanding in Thailand. By 2025, Thailand will be the second biggest e-commerce market in Southeast Asia. Central Group wants to remain competitive.

Currently online sales account for 2% of Central Group’s revenue. It aims to increase this to 15% within five years. It is also striving for an annual revenue growth of 13% in 2018. Its partnership with Jing Dong will help it reach these goals.

Central Group tried to establish presence in China in 2015. But Chinese market was already overcrowded. Central Group also faced difficulty in logistics and management. It had to shrink its operations in China. The partnership will expand the products available to Jing Dong’s Chinese customers. Products on the JD.co.th website will also appear on JD.com. Chinese consumers will have access to Thai products. It will be a new seamless shopping experience for both Chinese and Thai consumers.

Both companies are looking to expand in the Southeast Asian market

The partnership is part of a wider strategy to keep both companies competitive in the region. Jing Dong extended its e-commerce services to Indonesia in 2015. It also recently led an investment into Vietnam through e-commerce service, Tiki. Central Group also operates in Vietnam, Indonesia and Malaysia.

Sources: Reuters (1, 2), Tech in Asia, JD.com

Southeast Asia has a population of 600 million people. The region’s internet economy will grow fourfold to US$200 billion by 2025. The venture could not come at a better time. Also, with Thailand’s year-long mourning period over, consumer spending is increasing. Jing Dong and Central Group can capitalise on the period of elevated consumer spending.

Jing Dong and Central Group are entering an already crowded market

Jing Dong and Central Group face fierce competition. Alibaba is also eyeing up expansion in the region. It invested US$2 billion in Lazada. Lazada is the number one online shopping platform in Southeast Asia. Alibaba now owns an 83% stake in the company. Amazon also entered the region last year, launching in Singapore. Tencent already got e-payment license in Malaysia. It will be able to launch local transactions in Malaysia. Tencent also invested US$550 million in Garena, renaming the brand as SEA. SEA is a promising e-commerce and game startup in Singapore.

Jing Dong had planned to invest in Tokopedia. It would have been a significant investment. Tokopedia is of the leading online shopping platforms in Indonesia. But Alibaba beat Jing Dong to it and led a US$1.1 billion investment in e-commerce firm.

The victor of Southeast Asia e-commerce market is not yet in sight. Fintech giants poured money to back local startups. Each startup would have potential to be the game changer in the battle. Investments and merger and acquisitions (M&As) will continue. At least it will last till they have a winner. If we look at the Chinese e-commerce market, we may predict this battle is far from ending.

The joint venture will give the pair a competitive advantage in Thailand. But it is not enough for them to win bigger Southeast Asia market. The two companies will need to seek more M&As to strengthen their presence in Southeast Asian.