Chinese e-commerce giant, JD.com is expanding in the travel-retail channel by taking a shareholding in the North Asia business of Paris-based global duty-free operator Lagardère Travel Retail, part of France’s Lagardère Group.
JD.com and state-owned fund China Jianyin Investment (JIC) are jointly injecting $112 million to take respective shares of 18.6% and 3.7% in the North Asia division. It generated revenue of $176 million in 2020 from travel shopping and duty-free activities in Mainland China, Hong Kong and Japan. Subject to customary procedures, the deal is expected to close later this month.
The tie-up does not come as a surprise. Last fall, JD.com’s rival Alibaba Group took a stake in the world’s biggest airport retailer Dufry, with plans to jointly target the travel-retail business in China which is booming. Now it’s JD’s turn to jump in.
According to Lagardère, the partnership will enable it to accelerate growth in China and evolve its business model by honing omnichannel skills, an area in which JD.com excels. The e-commerce player also has strong expertise in smart supply chain, logistics and analytics/consumer insights.
This is exemplified by the company’s recent 618 Grand Promotion in June. During the event, online orders reached $15 million and 84% were fulfilled on the same or next day across China. Many luxury players took part including brands from LVMH Group, L’Oreal’s Kiehl’s, and Estée Lauder Companies
Benefits of the deal for JD.com include Lagardère’s presence in 32 airports and 28 high-speed railway stations in North Asia through a network of 480 stores selling a wide range of categories including luxury, duty-free, specialty retail and food and beverages.
Omnichannel goals in travel-retail
JD.com vice president Simon Han, who supervises the global import platform JD Worldwide, expects the new partnership to leverage each company’s respective strengths and “allows us to explore more opportunities in the travel-retail sector.” Developing omnichannel duty-free and duty-paid shopping services at travel locations is one of their joint goals.
During the pandemic, China has become a lifeline for the ravaged duty-free business, so much so that in Lagardère’s case, the country’s share of company revenue soared from 2% in 2019 to 7% last year. Lagardère Travel Retail is looking to further maximize China’s solid performance to make up for weaknesses still being seen in the rest of the global duty-free market.
Lagardère North Asia is run by CEO Eudes Fabre and he said in a statement: “The expertise of our partners will help position us for the next phase of growth in the region. Domestic consumption in China and the digitalization of the travel experience are powerful and positive trends for the years to come.”
JD.com has an enviable base of more than 500 million customers, so it knows a thing or two about domestic demand drivers. In the second quarter, thanks to its successful 618 event, the company added another 32 million new users, and according to the company’s chief financial officer Sandy Xu, that was the largest single-quarter increase of new users in the company’s history.
On August 23, Xu also said in an interim results statement: “We are encouraged by the continued diversification of our revenue streams, reflecting our open ecosystem strategy of empowering customers and business partners through JD.com’s supply chain-based technology and infrastructure.”
One of the benefits of that infrastructure is speedy delivery to almost all of China’s population, a strength that Lagardère Travel Retail will likely want to tap into for its domestic duty-paid travel retail business.