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Business deals

China's JD.com injects $100m into brick-and-mortar retailer Gome

Deal with appliance chain sets up rival to Alibaba-Suning alliance

Gome Retail Holdings operates 2,600 outlets across China.   © Reuters

DALIAN, China -- JD.com will spend $100 million to back appliance store operator Gome Retail Holdings, a move that will expand the brick-and-mortar presence of China's second-largest etailer.

The recently announced strategic tie-up has JD.com purchasing convertible bonds that could translate to a 2.8% stake in Gome. The date of the transfer has yet to be set.

Gome, one of the China's largest appliance chains, will apply the proceeds toward debts and gains access to JD.com's online shopping platform.

The agreement is expected to allow customers to examine items at Gome's roughly 2,600 stores and later purchase the products through JD.com. The two sides will also cooperate on procurement and logistics.

JD.com has been making inroads into the physical retail space. In April last year, the tech giant spent 1.27 billion yuan ($177 million) to acquire a 46% stake in electronics seller Jiangsu Five Star Appliance. In January, JD.com completed the purchase of a 9% stake in cellphone store chain operator Beijing Digital Telecom for nearly 214 million Hong Kong dollars ($27.6 million).

The partnership with Gome splits the Chinese appliance market into roughly two camps, with the other overseen by Alibaba Group Holding. The domestic e-commerce leader recently acquired a 19.9% stake in Suning.com.

Suning.com commanded a 25% share of Chinese appliance sales in the first quarter, with JD.com coming in next at 19%, according to industry data. Alibaba's Tmall platform had an 11% share, while Midea Group had 5%.

Appliance sales fell 36% on the year to 117.2 billion yuan. Due to the novel coronavirus epidemic disrupting shopping habits, the drop in sales this year is projected to exceed the decline in 2019.

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