OK Google, Welcome to Logistics

OK Google, Welcome to Logistics

In today’s business world, everyone is everything. Industries are so interconnected that being part of one requires you to be a part of many others. Take Amazon, for example: as we’ve written before, the e-commerce giant is also a growing logistics player … and they’re becoming a search engine as well.

The same is true for Google. This week, Google invested $550 million in Chinese e-commerce giant JD.com. We all think of Google as a search engine and an advertising platform. But they’re also adding e-commerce capabilities, and as such will also need a robust logistics arm. So this isn’t just an investment in Chinese e-commerce. It has the potential to make Google a major player in the future of logistics.

Here are some key takeaways from Google’s investment and what it means for the wider world of logistics.

Google, the E-commerce Giant

While JD.com is the second-largest e-commerce company in China (after Alibaba), Google’s investment in JD.com isn’t even their most notable move towards building out a retail business. Google recently expanded its e-commerce capabilities with Google Express, a service that allows user to search for products they need on Google, then shows purchase options from popular retailers within the search results.

If that sounds familiar, it’s because that’s how e-commerce companies work today. Amazon and Alibaba are effectively search engines for consumer products, and as retailers, they can convert searches to purchases in an instant. They rarely -- if ever -- have no search results, and they almost always have multiple buying options.

Adding JD.com’s products to Google Express helps bolster Google’s e-commerce options. Already partnered with companies like Target, Walmart, and Costco, JD.com’s wide range of available items ensures that Google Express users can purchase directly from their Google search. And of course, for JD.com, having their products featured on a search engine like Google (outside of China) instantly makes them more competitive with Amazon and Alibaba.

The Logistics Connection

Google knows that e-commerce success and efficient delivery go hand in hand. That’s why Google Express offers free shipping on orders that meet a partner store’s minimum (usually $25 to $35 dollars). In JD.com, they get a partner that has extensive experience in the retail supply chain. Like Google, JD.com knows a critical part of online shopping is last-mile delivery.

JD.com has been handling shipping in a challenging logistics market for about two decades now. That market, China, is one where Google hasn’t been allowed to break into. If JD.com helps Google make inroads into China as a retailer, Google understands that they’ll need to hit the ground shipping. Investing in JD.com could be an investment in the future of Google e-commerce in one of the densest and most profitable consumer markets in the world.

Hidden Gems of the Deal

A lot of money is being poured into “solving” logistics. Both Google and JD.com have looked into developing future technology that could revolutionize last-mile delivery. Given the resources available to both, if they share their R&D finds, this could be one of the partnerships that redefines shipping technology over the next decade.

Whatever changes they introduce to logistics will be data-driven. Between them, Google and JD.com can collect tons of data on consumer preferences and how they relate to every step of the global supply chain. All that data acquired can inform predictive analytics that the global supply chain can universally benefit from.

Predictive analytics allow companies to not just apply brute force to developing e-commerce and logistics capabilities, but also to build them strategically based on the demands of their clients and suppliers. The point isn’t just quantitative (capturing existing or growing new market share) but also qualitative … increasing the profitability at scale.

Some might argue that corporate consolidations are a threat to a competitive marketplace. But it’s just as easy to argue that partnerships like the one Google and JD.com are forging will unleash broad new efficiencies. Driven by data, they could bring about massive changes and trigger a rising tide that will lift all boats.

For more insights on the future of logistics, check out our Resources Library.

By: Fauad on June 22, 2018, 12:24 p.m.