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What JD Is Set to Get from Its Xinning Deal

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China’s logistics industry valued at over $40 trillion

JD.com (JD) recently invested ~$55 million in purchase a ~10% stake in Jiangsu Xinning Modern Logistics, a Chinese logistics company focusing on the consumer electronics supply chain. The Xinning investment has expanded JD’s in-house logistics business and presence in China’s booming logistics industry. JD Logistics handles package deliveries for JD’s retail business and provides third-party delivery services. The Chinese Academy of Sciences, cited by China Daily, estimates that China’s logistics industry grew to 280 trillion yuan (~$41 trillion) last year from ~$33 trillion in 2017 and ~$31 trillion in 2016.

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JD looking to cut logistics costs

JD.com has also set in motion a process that could boost its bottom line. JD Logistics and Xinning have formed a strategic partnership focused on boosting efficiency and cutting operational costs. As logistics are among JD’s most inexpensive operations, cutting costs in this area could improve the company’s profits.

In the first quarter, JD’s profit rose year-over-year to ~$1.1 billion from ~$220 million a year ago. Alibaba (BABA) and Amazon (AMZN) made profits of $3.8 billion and $3.6 billion in the first quarter, respectively, whereas eBay (EBAY) and Etsy (ETSY) posted profits of $521 million and $42.2 million.

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