China-based ecommerce platform JD.com has long toiled in the shadow of the country’s market leader, Alibaba. While Alibaba found success with its Taobao marketplace, JD.com took the arguably tougher route of managing its own inventory.
That approach appears to be paying dividends as the company hit profitability for the first time in earlier this year, reporting a net income of RMB239 million (roughly $35 million) in the first quarter.
This week JD.com bought a piece of UK-based online luxury fashion marketplace Farfetch, trading $397 million for an unspecified stake. In a statement, JD.com said the investment would make it one of Farfetch’s largest shareholders.
The partnership will give Farfetch access to JD.com’s online payments service JD Pay, its logistics network, microcredit service Baitiao and its marketing acumen—including a close relationship with popular messaging platform WeChat—in China, where it has operated since 2014.
In return, JD.com gets to generate close ties with a luxury ecommerce platform to serve a new, but growing element of China’s consumer class. “We have always believed that the long-term trend of Chinese ecommerce is toward quality over price, and this partnership with Farfetch further extends our lead in the battle for the future of China’s upwardly mobile consumers,” said JD.com Chairman and CEO Richard Liu in a statement.
Farfetch currently hosts goods from some 700 global luxury brands and retailers, but unlike JD.com, does not manage its own inventory. The company raised $110 million in a Series F round held in 2016, and Bloomberg reported that COO Andrew Robb confirmed that the company was planning to stage a $5 billion initial public offering in the US.
JD.com appears to hold growing appeal for Chinese consumers, who once flocked to Taobao for the lower prices on goods of questionable quality and provenance, but are now moving upmarket to more established brands.