Race for grocery budgets
JD.com (JD) recently announced that it plans to open as many as 1,000 supermarkets across China in the next three to five years. The announcement came three months after it picked up a $550 million investment from Google (GOOGL) and subsequently entered an agreement that lets it tap into Google’s online platform to speed up its international expansion.
JD.com and rival Alibaba (BABA) are in a race to establish a physical store presence as they pursue household grocery budgets. Although consumers are increasingly embracing online shopping, most grocery purchases are still made in physical stores. That’s increasing the need for online retailers such as JD.com to open physical outlets and help them capture more grocery spending.
Speeding up deliveries
The supermarkets that JD.com plans to open will operate under its 7Fresh brand. JD.com currently operates two 7Fresh locations in Beijing. Alibaba also runs a supermarket chain under its Hema brand.
JD.com and Alibaba are also opening physical stores in order to speed up deliveries. JD.com, for instance, delivers grocery orders from 7Fresh stores to customers’ doors within 30 minutes.
Amazon considering 3,000 AmazonGo stores
JD.com’s plan for more 7Fresh supermarket outlets comes at a time when Amazon (AMZN) is also investing in physical stores. Amazon acquired more than 450 stores through its purchase of natural foods retailer Whole Foods Market in 2017 and is considering opening up to 3,000 stores by 2021 under its AmazonGo brand, according to Bloomberg.
JD.com is an ally of Walmart (WMT), which operates hundreds of stores across China. Earlier this year, Walmart adopted Tencent’s WeChat Pay in its stores in western China. JD.com’s revenue increased 31.2% year-over-year to $18.5 billion in the second quarter.