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Google (GOOGL) Plans to Invest in JD.Com, Ups Game Against Amazon (AMZN)

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Alphabet Inc (NASDAQ:GOOGL)’s division Google has announced its plans to invest $550 million in, JD.Com Inc (NASDAQ:JD), one of the largest Chinese e-commerce companies. This will aid the company in strengthening footprints in the growing global online retail market.

Per the deal, the company will get 27.1 million Class A shares of JD.Com in return for the investment, consequently acquiring a minority stake in it.

The partnership will allow the e-commerce company to list its products on Google’s shopping site which will help it to expand customer reach. Further, these products will be sold in Europe and the United States allowing JD.Com to expand its market size beyond China. Furthermore, the deal will provide a competitive edge against Alibaba and Amazon.

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In addition, the deal will expand Google’s presence in the e-commerce market of China and Southeast Asia. This augurs well for the company’s global expansion and growth of the top line.

Coming to the price performance, shares of Alphabet have returned 10.1% on a year-to-date basis, against the industry’s decline of 0.4%.

Google (GOOGL) Plans to Invest in JD.Com, Ups Game Against Amazon (AMZN)

Retail Industry Holds Promise

Google’s robust efforts toward foraying into retail industry by partnering with online retailers and leveraging the power of its own shopping services like Google Shopping will help it in gaining momentum in the market. Notably, Google Shopping aids the customers in searching for products on different websites and allows them to make price comparisons.

According to the latest report from Mordor Intelligence, the global retail industry is anticipated to grow at a CAGR of 5.3% between 2018 and 2023 and to reach $31.9 trillion by 2023.

With the latest move, the company is well poised to reap the benefits from the online retail market of China which is growing at a rapid pace due to the increasing penetration of internet and mobile use.

Per the data from Forrester, China’s online retail market is expected to hit $1 trillion in 2018. Also, the total number of Chinese online shoppers is anticipated to reach 631 million by 2022. At present, China accounts for 42% of global e-commerce market share.

Consequently, the company’s continued focus on emerging e-commerce markets of Asia will help it to improve market share further.

Alphabet Inc. Revenue (TTM)

Google (GOOGL) Plans to Invest in JD.Com, Ups Game Against Amazon (AMZN)

Battle Against Amazon Intensifies

The recent investment will help Google in gaining a competitive edge against Amazon.com, Inc. (NASDAQ:AMZN) which holds a dominant position in the global e-commerce market. However, Amazon’s presence is limited in China due to the presence of Alibaba.

Google and Amazon have been archrivals in almost every sector including home automation, cloud, voice assistants, audiobooks and now in e-commerce sector.

Google has partnered with Amazon’s rivals like Walmart Inc (NYSE:WMT) and Target Corporation (NYSE:TGT) to make their products available online for purchase via its app called Google Express, intensifying competition.

The tech giant is also considering acquiring a minority stake in Flipkart by teaming up with Walmart. This will aid the company’s market position in Indian e-commerce market.

Recently, the company joined forces with Carrefour, a French grocer and this helped it in gaining competitive edge against Amazon in French online retail market. The products of Carrefour will be sold online via Google’s shopping app.

We believe Google Shopping, which makes the retailer’s products visible online easily, will continue to benefit the company in making further strategic partnerships with the retailers. This will help in strengthening competitive position against Amazon in future.

Currently, Alphabet carries a Zacks Rank #3 (Hold).

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