According to a Reuters analysis on February 21, if JD.com really acquires British electronics retailer Currys, Chinese e-commerce giant JD.com will obtain the store and warehouse network needed for rapid expansion in the UK and Europe at a low price. It is also worth noting that regulatory hurdles in the UK and Europe are unlikely to prevent JD.com from acquiring Currys, as electronics retail is not a “sensitive industry”.
Publish time: 21/02/2024 – 22:52
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Reuters quoted analysts as saying that JD.com’s announcement on Monday of its intention to acquire the troubled retailer highlights the Chinese company’s efforts to deepen its overseas business to counter weak demand and cutthroat competition in the domestic market.
Among China’s top e-commerce companies, including Alibaba Group Holding Ltd.
The company’s “new business” unit, which includes overseas units, generated sales of 11.6 billion yuan in the first nine months of 2023, compared with 17 billion yuan in the same period last year, accounting for only 1.5% of its total sales.
During the same period, Alibaba’s international e-commerce business generated revenue of 75.2 billion yuan, accounting for 10% of its total sales.
“JD.com is increasingly facing growth constraints in the domestic market,” said Liu Xingliang, director of the Beijing-based China Internet Data Center.
Reuters pointed out that Currys’ stock price soared on Monday after JD.com joined the camp of US activist investment fund Elliott Advisors to acquire the British electrical appliances group, and Currys has rejected Elliott’s $880 million bid.
Redwheel, Currys’ largest shareholder, said on Tuesday it supported the board’s decision to reject Elliott’s bid, but did not mention JD.com, which has not made a formal bid. Currys declined to comment on JD.com’s statement of intent. Meanwhile, the Currys Employees Union did not respond to a request for comment.
JD.com, on the other hand, also declined to comment. However, it is understood that JD.com was required to announce its clear intention to acquire Currys before March 18.
poor performance
Reuters analysis continued that unlike Diandian, which owns the rapidly expanding cross-border e-commerce website Teimai.com, and Alibaba, which operates international platforms such as AliExpress, Lazada and Trendyol, JD.com has a small overseas business and its latest The driving force is mainly focused on the construction of logistics networks rather than expanding into offline retail areas.
Acquisition of Currys will therefore give JD.com access to the electrical appliances retailer’s 21 warehouses in the UK and Ireland, 800 rental stores in eight countries and the products it stocks at huge discounts.
Jacob Cooke, co-founder and CEO of e-commerce consultancy WPIC Marketing+Technologies, told Reuters: “Even if the price goes up to $1 billion, that’s just what it costs competitors to enter these markets. It’s a fraction of the cost, and they’ll have a ready-made brand.”
Currys currently has a market capitalization of £762.8 million ($962 million).
It is unclear how JD.com will dispose of Currys stores. In other words, it will only focus on warehouse construction to cope with its recent expansion. JD.com has been gradually building out its logistics network in Europe, and its real estate arm acquired a 361,000-square-foot warehouse in the UK in 2022, its first warehouse in the UK.
Running a store-based company would represent a shift for online specialist JD.com, which has around a quarter of Britain’s £20 billion ($25 billion) electrical appliances market, and the deal It offers a potential shortcut without spending hundreds of millions of dollars on marketing and branding.
But it also comes with risks
Reuters then quoted Morningstar analyst Chelsey Tam as saying: “To turn Currys into an eye-catching business, it must be transformed (but) JD.com does not have a good track record overseas. “
Currys has struggled to grow after experiencing a sales peak during the coronavirus pandemic as high inflation prompted European consumers to tighten their belts. Because JD.com has the buying power of manufacturers and brands, its acquisitions could lead to cheaper prices for consumers, a winning strategy for other retailers with roots in China.
Reuters analysis shows that electronic products are one of JD.com’s pillar categories. JD.com may leverage its relationships with brand owners and competitive procurement costs to bring more, better and cheaper Chinese electronics to Currys.
JD.com’s logistics business operates nearly 90 warehouses overseas, and the company has promoted its logistics network as a tool to promote overseas sales of Chinese products.
It also launched its own Temu-style platform in Europe two years ago to leverage its logistics network.
The Ochama platform sells everything from groceries and toothbrushes to smartphones and toasters, offering door-to-door delivery from a Dutch warehouse in 24 countries across Europe and pickup at more than 65 locations.
It is worth mentioning that according to Morningstar analyst Chelsea Tan’s assessment, regulatory obstacles in the UK and Europe are unlikely to hinder JD.com’s acquisition of Currys because electronic product retail is not a “sensitive industry.”
If JD.com can pull it off, a successful reboot of Currys could be a tool for Jian.com to become a major player in the UK and Europe to rival Amazon, and a bold shift in gears for founder Liu Qiangdong, who is known in China as someone who is not afraid of taking the next step. Big-bet executive.
Jeffrey Towson, a partner at TechMoat Consulting, also told Reuters: “The acquisition of Currys will be the boldest move Liu Qiangdong has ever made.”
The Guardian: Chinese online retailers join takeover battle
According to the British Guardian report, Currys was founded by Henry Curry in 1884 as a bicycle manufacturing company. After being listed on the London Stock Exchange in 1927, it began to sell toys, phonographs and radios. It is now a member of the FTSE 250 index of mid-cap companies.
In 2021, Currys changed its strategy and merged the four brands it operates (including PC World, Dixons and Carphone Warehouse) into one central brand. In 2020, Currys also closed 531 independent Carphone Warehouse stores and 2,900 jobs were eliminated.
The retailer has struggled over the past two years as high inflation has hit demand across all markets. In July, the company canceled its dividend and cut expenses at its Scandinavian operations.
Clive Black, head of consumer research at stockbroker Shore Capital, said the bids were “a red flag for low-rated UK stocks, which have been selectively picked for acquisition in recent times, often by Private capital takeovers.” Black also said the British government’s “performance and capabilities” had driven down the share prices of British companies, leaving them vulnerable to foreign takeovers.
However, Black said he saw a “bright future” for British consumers as inflation slowed, which would benefit consumer goods companies hit by the economic slowdown.
According to data from S&P Capital Markets Intelligence, Currys’ largest shareholder is Redwheel, an asset management company formerly known as RWC, with a 15% stake. Other shareholders include Frasers, the retail group owned by Mike Ashley, which has acquired or merged a number of struggling British brands.
In addition, according to the Guardian, both Elliott and JD.com said they were unsure whether they would make a binding offer.
2024-02-21 21:52:51
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