JD Logistics, a unit of Chinese e-commerce giant JD.com, is set to raise about $3.2 billion in an initial public offering in Hong Kong, according to media reports, amid brisk online shopping in the pandemic era.
The IPO would be the second-largest listing in the financial hub this year following short-video app operator Kuaishou Technology’s $5.4 billion float in February. JD Logistics’ shares are due to start trading on May 28.
“The boom in e-commerce worldwide has driven rapid growth in the international logistics industry, with the Covid-19 pandemic providing a further turbocharged boost to global e-commerce industry growth in 2020,” says Rajiv Biswas, executive director and Asia-Pacific chief economist at IHS Markit.
Online sales in China alone make up about 22% of total retail sales of consumer goods after brisk growth over the past two years, Biswas says.
JD Logistics, which handles warehousing and courier services, was spun off in 2017 from Chinese billionaire Richard Liu’s JD.com. Singapore sovereign-wealth fund Temasek, Blackstone and SoftBank Group’s Vision Fund, among others, will invest in the JD unit’s IPO. SoftBank, led by Japanese billionaire Masayoshi Son, counts logistics and warehouse robotics among its investment priorities.
Despite competition from the larger Alibaba and the growth of six-year-old upstart Pinduoduo, JD.com’s unit is the largest player (by total revenue) in China’s integrated supply chain logistics services industry, according to data cited in its prospectus.
JD.com has secured its position as the only big Chinese e-commerce company with its own logistics unit to support business, says Sandy Shen, senior director with the digital commerce team at Gartner. Alibaba, meanwhile, relies on partners, Shen notes.
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“JD’s way of operating isn’t the same,” she says. “They’ve always done logistics as part of their business model.” JD Logistics uses its own technology to cut “redundant distribution layers” for e-commerce customers and improve inventory management, according to its prospectus.
JD’s e-commerce and logistics operation may find itself limited to the China market due to political pressure from offshore, says Abishur Prakash, an author on technology and politics. India and Indonesia have started to curb foreign e-commerce to let domestic rivals flourish, Prakash believes.
“The biggest challenge is how global JD.com, including its logistics division, can become with U.S.-China tensions so high,” he says. “The new wiring of logistics is algorithms and machines, meaning JD would be ‘exporting’ Chinese technology wherever it opens shop.”