TOKYO/HONG KONG -- Chinese internet group JD.com on Thursday said it will test driverless deliveries with Japanese peer Rakuten, hoping to take a first step toward expanding its robotics business internationally.
China's second-largest e-commerce company will provide delivery robots -- drones and unmanned ground vehicles that are equipped with cameras and sensors for self-navigation -- to Rakuten, which will use them to test last-mile deliveries in Japan. JD.com operates more than 100 drones and 50 driverless ground vehicles in China, according to Xiao Jun, who leads the company's robotics division.
Though these deliveries are mostly in rural areas and unprofitable, JD's know-how could prove valuable in Japan, where a ban on trial tests on public roads will be lifted next fiscal year.
Rakuten is ramping up its own distribution infrastructure to counter Amazon, and sees driverless deliveries as a way to cope with surging logistics costs. Japan's leading online services group aims to run trials using JD.com robots on privately owned properties later this year. Rakuten is also developing its own fleet of smaller delivery drones.
"We like to utilize the best hardware," said Koji Ando, a group managing executive officer at Rakuten. "JD.com already has delivery experience in China, and its technology is advanced."
JD.com does not have an e-commerce business in Japan, and its operations in the country have focused on importing Japanese goods to China. In China, JD.com has rolled out semi-automated warehouses and supermarkets, as well as restaurants that use robots to cook and serve meals.
"This is our first partnership with a Japanese company," Xiao said. "There will be more, and it will expand to areas like warehousing and retail."
But bringing robots to Japan could draw scrutiny over their data collection capabilities. In December, Japan issued guidelines that effectively banned Chinese telecommunications equipment maker Huawei Technologies from government contracts.
Xiao said that under the Rakuten partnership, functions that collect sensitive data like mapping technology will be managed entirely by Rakuten.
"We are only providing products," he said. "We are aware that companies have data security policies."
The move comes as Chinese e-commerce companies grapple with a slowing domestic economy.
With a market share of 16.3%, JD.com trails Chinese e-commerce leader Alibaba Group Holding, which controls more than half of the market, according to eMarketer. But some analysts expect that gap to widen as the Chinese economy cools and shoppers look for cheaper items on Alibaba's Taobao platform instead of JD.com, which is known for selling premium products. JD.com has also faced rising competition from No. 3 player Pinduoduo, which holds 5.2% of China's e-commerce market and targets cost-conscious shoppers.
There are some early signs of downward pressure. Last week, JD.com announced that it will lay off 10% of senior management in 2019. The company reported revenue of 104.8 billion yuan ($15.6 billion) for the July-September quarter, falling short of analyst estimates. JD.com declined to comment on whether its slower growth played a role in the layoffs.