Chinese e-commerce giant, JD.com is expanding in the travel-retail sector by acquiring a stake in the activities in North Asia of the global duty-free operator based in Paris Lagardère Travel Retail, which is part of the French group Lagardère.
JD.com and state-owned China Jianyin Investment (JIC) jointly inject US $ 112 million to take respective stakes of 18.6% and 3.7% in the North Asia division. It generated revenue of $ 176 million in 2020 from travel purchases and duty-free activities in mainland China, Hong Kong and Japan. Subject to customary procedures, the deal is expected to be concluded later this month.
The rapprochement is not a surprise. Last fall, JD.com rival Alibaba Group took a stake in the world’s largest airport retailer, Dufry, with the intention of jointly targeting the travel retail business in China, which is booming. Now it’s JD’s turn to get started.
According to Lagardère, this partnership will allow it to accelerate its growth in China and to change its economic model by perfecting its omnichannel skills, an area in which JD.com excels. The e-commerce player also has solid expertise in smart supply chain, logistics and analysis / consumers.
This is illustrated by the company’s recent 618 Grande Promotion in June. During the event, online orders reached $ 15 million and 84% were fulfilled same or next day across China. Many luxury players took part, including brands from the LVMH group, L’Oréal’s Kiehl’s and Estée Lauder Companies
Benefits of the agreement for JD.com include Lagardère’s presence at 32 airports and 28 high-speed train 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 beverage.
Omnichannel goals in travel retail
JD.com Vice President Simon Han, who oversees the JD Worldwide global import platform, expects the new partnership to build on each company’s respective strengths and “allow us to explore more. opportunities in the travel retail sector “. Developing duty-free and duty-paid omnichannel shopping services at travel sites is one of their common objectives.
During the pandemic, China has become a lifeline for ravaged duty-free trade, so much so that in the case of Lagardère, the country’s share of the company’s turnover fell from 2% in 2019 at 7% last year. Lagardère Travel Retail seeks to further maximize the solid performance of China to address the weaknesses still observed in the rest of the global duty-free market.
Lagardère North Asia is led by CEO Eudes Fabre and he said in a statement: “The expertise of our partners will help us position ourselves for the next phase of growth in the region. Domestic consumption in China and the digitization of the travel experience are strong and positive trends for the years to come. “
JD.com has an enviable base of over 500 million customers, so it knows a thing or two about what drives domestic demand. In the second quarter, thanks to the success of its 618 event, the company added 32 million new users and, according to company chief financial officer Sandy Xu, this was the largest increase in a quarter of new users in the history of the company.
On August 23, Xu also said in an interim earnings statement, “We are encouraged by the continued diversification of our revenue streams, reflecting our open ecosystem strategy to empower customers and business partners through technology and to JD.com’s supply chain-based infrastructure. ”
One of the advantages of this infrastructure is rapid delivery to almost the entire Chinese population, a strength that Lagardère Travel Retail will likely want to harness for its domestic tax-free travel retail business.