In a dramatic announcement last week, Thailand’s Central Group said it would form two joint ventures with Chinese e-commerce giant JD.com for an initial investment of Bt17.5 billion.
JD.com brings to the partnership its competitive edge in logistics and technologies such as artificial intelligence, cloud computing, drones and robots, while Central offers retail expertise including knowledge of Southeast Asian markets, brand relationships, customer base, physical store network and loyalty programmes.
E-commerce has enormous growth potential in Thailand, which the partnership hopes to tap into. For example, only 1-2 per cent of Central’s sales are online; by working with JD.com, Central aims to increase this to 15 per cent by 2021.
A major benefit for Central is better access to the Chinese market. JD.com has an alliance with Tencent, owner of the popular messaging app WeChat that averages 902 million daily logged-in users (as of September 2017). JD.com customers who make their purchases with WeChat have their goods delivered using an advanced logistics system which increasingly features drones. JD.com’s 150 or so drones make more deliveries than any other drone user globally. The company is also testing drones that can carry up to a tonne, and using robots in its warehouses.
JD.com’s drone-delivery model is different from that being tested by US retailers such as Amazon and 7-Eleven. Instead of delivering packages direct to individual homes, local distributors receive and distribute them. In the US, a stricter regulatory environment and privacy concerns mean drone deliveries are not advancing as rapidly as in China and are still in the testing phase.
JD.com founder and chairman Richard Liu believes drone deliveries would save massively on costs, especially in rural areas. He estimates that drone deliveries are at least 70 per cent cheaper than delivery by truck and take a fraction of the time.
Unlike China’s other e-commerce giant Alibaba, JD.com is focused on building a complementary bricks-and mortar-business through strategic alliances with strong retail brands such as Walmart, and selling luxury goods through its partnership with the online luxury-brand marketplace Farfetch.
According to Liu, JD.com is attracted to Thailand because of its large population, developed infrastructure and strong logistics network. The plan is to make Thailand a major hub for e-commerce expansion across Southeast Asia.
Many North American retail stores are closing – Sears and Macy’s among them – so it is encouraging to see the confidence reflected in this partnership. Given the Chinese love of shopping, Thailand’s experience in developing luxury malls and the rapid development of technology in this part of the world, this points to a prosperous future for retailing in Asia.