Alibaba takes an 8% stake in Tencent-backed anime streaming site Bilibili

Ecommerce giant Alibaba is continuing its push into the world of youth culture after it scooped up an 8 percent stake in anime streaming and game publishing company Bilibili.

According to a securities filing on Thursday, Alibaba’s Taobao marketplace has acquired about 24 million shares in Bilibili, the Shanghai-based firm that has captured 93 million monthly users from hosting licensed anime titles, video games and user-generated content.

The financial gesture is hot on the heels of a partnership announced in December that saw the pair working to monetize Bilibili’s content assets. For one, Alibaba can help Bilibili creators sell merchandise like cosplay costumes and anime toys through Taobao’s online bazaar. Bilibili itself owns an e-store, but Taobao’s command of 700 million monthly users dwarfs its reach. 

“The partnership is great news for ACG content creators,” a Shanghai-based merchant that sells Lolita costumes on Taobao told TechCrunch, referring to the acrynom for “anime, comic and games.” The owner sells through both Taobao and Bilibili, though most sales have come from Taobao.

“We can now leverage Taobao’s gigantic platform and seasoned ecommerce operating capabilities to further help our content creators realize and improve their commercial values, thereby building a more virtuous content community and commercialization-focused ecosystem,” says Bilibili chief executive and chairman Chen Rui in a statement.

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Screenshot: Taobao has a dedicated channel for anime, comic and gaming (ACG) items.

What Alibaba gets in return is access to China’s Generation Z. Bilibili claims that 82 percent of its users were born between 1990 and 2009. In a savvy move, Alibaba hooked up its food delivery unit Ele.me with Bilibili in December to tap a demographic of anime-watching and game-playing young people reliant on delivered meals.

Over 1.6 million content creators, including anime, comic and games (ACG) experts, were actively supporting the Taobao app and helping brands on our platform engage with consumers,” said Fan Jiang, vice president of Alibaba and president of Taobao, back in December. “Through deep cooperation with intellectual property holders and content creators, Taobao has experienced the great potential of ACG.”

Investors’ darling

Tencent and Baidu’s iQiyi have also spent big bucks to beef up their respective anime offering, but Bilibili’s flourishing youth community gives it an edge over these deep-pocketed video-streaming heavyweights and to an extent makes it an investors’ darling. The eight-year-old company is notable for being one of the rare companies that count both Alibaba and Tencent — which compete on multiple fronts spanning ecommerce to cloud computing — as their investors. Other companies that won backings from the duo include China’s largest ride-hailing service Didi Chuxing.

Last October, social media and gaming juggernaut Tencent poured nearly $320 million into Bilibili in exchange for a 12.3 percent stake. While Alibaba helps drive revenues to Bilibili’s community of creators and potentially boost their loyalty to the site, Tencent could help it save on licensing fees for games and animes.

“Tencent and Bilibili are two of the major players in the animation industry. By working with Tencent, this will intensively expand our content offering and effectively decrease our content investment in the animation copyright procurement,” Chen of Bilibili said during the company’s Q3 earnings call.

“The agreement will enable us to leverage Tencent’s primary content, particularly in licensing, co-producing and investment in anime as well as publish Tencent’s large portfolio of high-quality mobile games,” Bilibili’s chief financial officer Sam Fan added.

WeWork could challenge Starbucks in China with new on-demand service

The rise of Starbucks in China, like that in the west, is closely linked to its function as a “third space” for people to hang out between home and work. In recent years, a bevy of coffee entrepreneurs are trying to topple the American giant’s dominance in China and lately, an unexpected contender — WeWork — has joined their camp.

This month, the office tenant and workplace service provider launched WeWork Go, a new feature that allows China-based users to rent a desk by the minute so they are no longer tied to long-term leases. While Starbucks provides free accommodation and charges for coffee, WeWork flips the equation to offer free coffee and paid space. Starbucks is already being squeeze in China by emerging rival Luckin Coffee, a well-funded startup that explicitly pledges to take on the Seattle-based giant with a model that focuses on coffee delivery.

WeWork Go works a bit like other shared services, with an app that lets users check the occupancy of a list of offices in real time before they travel over. Upon arrival, users scan a QR code at the gate, pop the door open, get seated in the common area and the billing begins.

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WeWork Go available through a WeChat mini program. Screenshot: TechCrunch

The firm says it monitors traffic flow closely so the common space isn’t flooded with fleeting users. Booking private rooms require additional fees. Go claims to have picked up 50,000 registered users so far after piloting for three months across an inventory of 18 locations in Shanghai, where WeWork nestles its China headquarters.

Made for China

Instead of building a native app, WeWork Go operates via a WeChat mini program, a form of a stripped-down app that works within China’s largest social network. Mini programs are an increasingly popular way for startups to trial ideas thanks to their relative ease to develop. “[Go] is a key development of our China localization,” a WeWork spokesperson told TechCrunch.

Go is tailoring to the so-called “part-time users.” “These people would not purchase the monthly membership. They would work at home or a coffee shop, restaurant, or library,” Dominic Penaloza, who heads innovation and technology at WeWork China, told TechCrunch. He first conceptualized the on-demand workplace service at Naked Hub, a smaller local rival WeWork China bought out for $400 million last year. After the merger, the executive alongside his tech team joined WeWork and continued with the project that would later become Go.

The pay-as-you-go feature is also getting rolled out stateside at a new Manhattan location last week.

Penaloza admits Go could be competing with coffee shops for it offers “an alternative type of the third space for freelancers, mobile workers, business travellers or those who want to briefly step aside from their offices for a mental break.” The obvious target is Starbucks, which commands a whopping 51 percent share of the country’s booming coffee market.

Made for WeWork

For WeWork, Go serves as a trial for those deciding whether to sign on monthly subscriptions. What they are weighing is the 1,830 yuan ($271) price tag for a hotdesk in downtown Shanghai. By comparison, Go starts at 15 yuan and goes up to 30 yuan an hour at more prime locations, offering the same perks as the full-time hotdesking plan, which includes access to common spaces, beverages and wifi.

Users can do their math. “If you started as a WeWork Go member, and if you use our service quite a lot, you will realize it’s much more economical to purchase monthly subscriptions. WeWork Go enables WeWork to reach an entirely new market segment,” suggests Penaloza.

The flexible pricing may help WeWork — which generates the bulk of its revenues from large corporations — reach a wider user base. The shared office industry in China has entered what real-estate researcher Jones Lang LaSalle calls the “second phase,” with big firms moving into premium workplaces like WeWork and local player Soho 3Q. Cash-strapped startups, on the other hand, increasingly turn to government-backed incubators for lower costs.

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Photo: WeWork China

Several early users of Go told TechCrunch they found the service delivering a “quieter” and “more comfortable” vibe than most cafes, but distance is key when they are in a rush. WeWork currently has about 60 locations across a dozen major Chinese cities, whereas Starbucks reaches a dense network of 3,330 stores and is shooting for 6,000 by the end of 2022. WeWork China got a boost for locations with the Naked Hub acquisition last year and says it’s open to adding third-party spaces such as restaurants into its inventory, though it has not taken a solid step towards that vision.

“There is a very interesting opportunity in the really downtown area, where WeWork locations and Naked Hub locations are quite full starting from after lunch until 5 pm,” notes Penaloza. “What’s amazing is that restaurants around those locations are quite empty at exactly the same time, so there’s a fascinating opportunity there but we haven’t done anything about it yet.”

Meet the little-known Chinese WiFi startup that rubs shoulders with WeChat and Alipay

A service that connects people to WiFi hotspots for free turned out to be one of China’s most popular apps, nestling in the top ranks with Tencent’s WeChat messenger and Alibaba’s digital wallet affiliate Alipay. According to a report from app tracking service App Annie, WiFi Master Key was China’s fifth-largest app and the world’s ninth largest by monthly active users in 2018, titles it also held in 2017.

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Report: The State of Mobile 2019, App Annie

The aptly-named WiFi Master Key, which owns the enviable domain wifi.com, is the product of a little-known startup called LinkSure in Shanghai that gets people onto the nearest wireless networks without the need for passwords. In addition, the app also recommends news and video content based on users’ past habits to lock them in, a feature similar to that of ByteDance’s algorithm-driven Jinri Toutiao news app.

Like many consumer-facing services in China, the app is free to use and monetizes traffic through advertising. It claims 700 million MAUs in China and another 100 million around the world. WeChat and Alipay, by comparison, each has around 1 billion MAUs worldwide.

The internet connectivity service helped LinkSure secure $52 million from a Series A round and value the parent at $1 billion back in 2015, only two years after the firm had launched. LinkSure has not announced further fundings since then and has kept a relatively low profile, though its founder Chen Danian was a household name from China’s early internet days. Along with his brother Chen Tianqiao, Chen founded Shanda Games, once China’s largest operator of online games before the rise of Tencent.

In November, Chen resigned as LinkSure’s chief operating officer as former Shanda executive Wang Jingying took over the reins to become one of the few prominent female CEOs in China’s tech sector.

Sharing passwords

The idea of freeloading on strangers’ networks strikes one as dodgy (or too good to be true), but the reality is more nuanced. WiFi Master Key keeps a database of passwords while encrypts and hides them from users, the company explains on its site. How does it collect all the credentials in the first place? Well, every time someone uses it to key in a login, the internet access app transmits that piece of information to the cloud. When people use it to, say, enter the WiFi passcode a barista just gave them, the data gets stored and shared to whoever at the cafe that uses the app.

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Aside from bringing connectivity, WiFi Master Key also provides news, e-book and video content to lock users in. Screenshot: TechCrunch

Those inner workings enable the app to bill itself as a WiFi “sharing” service and distance itself from anything that’s remotely a hack. But its data practice still draws concerns over user privacy. Last April, the Chinese state television broadcaster ran a 25-minute feature lambasting the app for “stealing passwords.” That was followed by an industry-wide crackdown from the state’s cybersecurity watchdog on all WiFi crowdsourcing services with lacklustre security practices.

LinkSure rebuked the state report and said it always asked for user consent before gleaning their data. Chances are few people read the lengthy terms of use on any kind of apps in real life, and the less digital savvy may fail to grasp how the app actually works. A major source of debate is when users inadvertently make their house WiFi publicly available after giving the credentials away to a guest who happens to use the data ravenous app to access the host’s network. WiFi Master Key has not responded to emailed questions about its security practices.

Aside from enabling strangers to crowdsource WiFi, LinkSure has also joined hands with two major Chinese telecommunication companies to offer a separate broadband card with appealing data plans. That puts it in competition with Tencent, Alibaba, Baidu and other tech firms that are working with big telcos to provide cheap or unlimited data enticing people to use their in-house apps.

Meanwhile, LinkSure is eying to beam down its own internet connection from the space as SpaceX and OneWeb do. The plan is to target the next few billion rural users who are just coming online and live in areas currently uncovered by terrestrial networks. LinkSure says it’s aiming to provide free satellite network around the world by 2026, with the first out of a constellation of 272 satellites bound to launch later this year.

A government-backed report put the number of people with internet access in China at 802 million in June, leaving nearly 600 million who are still unconnected. 30 million people came online for the first time last year, including an expanding base of elderly users who are increasingly embracing Alipay and WeChat to go about daily lives.

Tesla breaks ground on Shanghai factory which will product Model 3 EVs for China

Tesla CEO Elon Musk has confirmed that the company’s first overseas factory in Shanghai will focus on producing Model 3 vehicles for the Chinese market only.

Musk is currently in China to break ground on the new factory today, which is being developed in partnership with the Shanghai government — an ally that is likely to be incredibly useful. The deal was announced by Tesla in July and it was followed quickly by the opening of Model 3 pre-orders for China-based customers in November.

Initial construction of the Shanghai factory is set to be completed by the summer, according to Musk, who said that he expects production to begin before the end of this year. The facility is aimed at churning out 500,000 EVs a year when it reaches full production, which should happen during next year, all being well.

Musk clarified on Twitter — his go-to for public announcements — that Tesla’s U.S. facilities will continue to manufacture vehicles for the U.S. and other markets.

Tesla isn’t the only one planting manufacturing roots down in the country. Byton, a U.S-China rival founded by former BMW and Infiniti executives, said this week it is on track to complete production of a plant in Nanjing by May. The outpost will have a capacity to produce 300,000 vehicles per year, the company said.

In June, Byton secured a $500 million Series B funding round from investors FAW Group, Tus-Holdings and CATL. The company has raised $850 million from investors in addition to loans and subsidies from China.

Despite optimism behind the Shanghai project, China has been the source of concerns for Tesla in recent times.

The country has reduced subsidies for green vehicles while its ongoing trade spat with the U.S. is raising concerns for U.S. businesses looking to reach consumers in the middle kingdom. Tesla’s share price dropped by nearly eight percent before the New Year after the company reduced the price of the Model 3 by seven percent in China. That followed reductions to the Model X and Model S in November, and it also coincided with Musk pledging to reimburse tax credits to U.S. customers who miss them because their pre-December order isn’t delivered before the end of the year.

Still, the Chinese market is the largest in the world for electric vehicles and hugely important for future growth.

The country is said to already account for 35 percent of global EV sales, according to Bloomberg intelligence, which reports that cumulative sales reach four million in August 2018. That’s just the start. Chinese city Shenzhen, known as the world’s mecca for hardware technology, has replaced all buses with electric versions and 99 percent of its taxis, and the government wants 20 percent of all car sales to be plug-in hybrids or battery-powered models by 2025 — that’s around seven million cars per day.

Chinese stocks plummet as Huawei CFO arrest raises trade fears

A string of Chinese stocks fell hard on Thursday after the arrest of Huawei’s chief financial officer Meng Wanzhou in Vancouver deepened concerns over US-China trade tensions.

The Hang Seng China Enterprises Index of Chinese companies listed in Hong Kong was off 2.76 percent as of 12:40 p.m. On the Mainland side, the CSI 300 index of the top 300 stocks trading in Shanghai and Shenzhen fell 2.1 percent. The US stock market is closed Wednesday to honor former US President George H.W. Bush.

The crash arrived after Canadian officials detained Meng, daughter of Huawei’s founder and chief executive officer Ren Zhengfei, on suspicion that Huawei has violated American sanctions on Iran. Meng is facing extradition to the US.

Shares of Huawei’s main rival ZTE nosedived nearly 6 percent in Hong Kong by midday. Meng’s news also hit the suppliers of employee-owned Huawei across the Asian stock markets. Among the worst performers is Shennan Circuit, which slipped nearly 10 percent in Shenzhen as of this writing.

Huawei and its main rival ZTE have been targets of the US government that worries about the alleged ties between the telecom equipment makers and the Chinese governemnt. The US’s ban on ZTE sparks concerns that Huawei will face a similar fate. In April, the US Department of Commerce announced a seven-year ban that would restrict American component makers from selling to ZTE, which in 2017 pleaded guilty to violating sanctions on Iran and North Korea.

Chinese stocks had been on a downward trend prior to Meng’s arrest as a result of rising US tarrifs over the last few months. In October, the Shanghai benchmark index dropped to a four-year low.

Meituan, China’s ‘everything app’, walks away from bike sharing and ride hailing

A major player in the race to transport Chinese people around is losing steam. Meituan Dianping, the Tencent-backed all-encompassing platform for local services, continues to put the brakes on bike-sharing and ride-hailing, the company said on its earnings call on Thursday.

The eight-year-old firm is best known for competing with Alibaba-owned Ele.me in food deliveries — the segment that makes up the majority of its sales — and hotel booking, but it’s aggressively branched into various fronts like transportation.

In April, Meituan entered the bike-sharing fray after it scooped up top player Mobike for $2.7 billion to face off Alibaba-backed Ofo. Over the past few years, Mobike and Ofo were burning through large sums of investor money in a bid to win users from subsidized rides, but both have shown signs of softening their stance recently

Mobike is downsizing its fleets to “avoid an oversupply” as the bike-sharing market falters, Meituan’s chief financial officer Chen Shaohui said during the earnings call. Ofo has also scaled back by closing down many of its international operations.

In the meantime, Meituan said it has no plans to expand car-hailing beyond its two piloting cities — Shanghai and Nanjing — after venturing into the field to take on Didi Chuxing last December. The update is consistent with what the firm announced in its prospectus ahead of a blockbuster $4.2 billion initial public offering in Hong Kong this September.

The halt is likely related to changing dynamics in the country’s shared rides. Following two passenger murders on Didi, the Softbank-backed transportation platform that took over Uber China in 2016, Chinese regulators launched their strictest verification requirements for drivers across all ride-hailing apps. The mandate has squeezed driver numbers, making it harder to hire rides on Didi and its competitors.

During its third quarter that ended September 30, Meituan posted a 97.2 percent jump on revenues to 19.1 billion yuan, or $2.75 billion, on the back of strong growth in food delivery transactions. The firm’s investments in new initiatives – including ride-hailing and bike-sharing – took a toll as operating losses nearly tripled to 3.45 billion yuan compared to a year ago. Meituan shares plunged as much as 14 percent on Friday, the most since its spectacular listing.

WeWork is getting serious about China

Since its entry into China in 2016, WeWork has extended from four to around 60 locations across the country’s megacities like Shanghai, Beijing, and most recently, Shenzhen.

That’s one-sixth of WeWork’s 360 locations worldwide. It’s also equivalent to what WeWork has achieved in its early five to six years globally, Sern Hong Yu, regional head of project delivery at WeWork China, said at TechCrunch Shenzhen recently.

“Next year, it will be even faster,” he added, without revealing the exact number of offices that will open.

The executive confirmed that China will be one of WeWork’s fastest growing region and much of that boom will come from the rising number of enterprise clients.

While the coworking titan strives to redefine office spaces for old-school companies, these larger corporations are presumably a more reliable income source than long-shot early-stage startups.

But Yu said WeWork is also supporting nascent companies. The office operator runs a program called WeWork Labs that gives startups discounted desk space, an educational program, and mentorship without taking stakes in them.

The incubator is just one facet of WeWork’s expanding ventures. It’s been keen to distinguish itself from a pure coworking space. Besides offices, it manages a raft of ventures around the world that include shared apartments, wellness complexes, and even wave pools, all based on the tenet of “make a life, not a living.”

When it comes to China, WeWork says this package of services could help combat the country’s notorious “996” work regime, an acronym short for working from 9 am to 9 pm for six days a week.

“A lot of people like the [WeWork] workplace so much that stay longer than usual,” Yu said. “But in the meantime, we do remind them of the work-life balance.”

The American giant envisages a future where it exists in every other block down the street. But it has some serious contestants in China.

UCommune, which rebranded from UrWork after WeWork sued it over the name similarity, is one of them. The rival is founded by Chinese real-estate veteran Mao Daqing and claims to operate more than 200 co-working spaces across the world, most of which are in China.

WeWork and UCommune have emerged as the dominant forces in China’s coworking market after each grabbed sizable fundings in recent months. Shortly after Ucommune raised $200 million in November, WeWork scored a $3 billion warrant from SoftBank. The rivals have also been in an acquisition race. This year, Ucommune scooped up a number of small rivals and WeWork spent $400 million to pick up main competitor Naked Hub.

Alibaba and Amazon move over, we visited JD.com connected grocery store in China

The arms race to build the future of grocery stores is heating up in China. To no one’s surprise, the main contestants are the country’s ecommerce titans Alibaba and JD.com, which are turning offline for growth.

Online retail has flourished in China, but it still accounts for less than 20 percent of the nation’s overall consumption, according to the Ministry of Commerce. The goal of internet players is not to steal business from the offline counterparts, but to digitize old-fashioned merchants.

Long before Amazon bought out Whole Foods for $13.7 billion last year, Alibaba was making offline forays by forging partnerships with a department store operator, an electronics retail heavyweight, and more recently, a prolific hypermarket chain.

The purest manifestation of Alibaba’s physical push came in July 2017 when it rolled out Hema, a supermarket store that features cashierless checkouts and a robotic restaurant at one branch.

Since opening, Hema has been rapidly expanding and now operates in 80 locations across China’s megacities, with the help of a few franchises.

Meanwhile, JD is trailing closely through a flurry of deals with key brick-and-mortar players like supermarket group Yonghui and the American giant Walmart.

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Entrance to 7Fresh, which stands for “fresh seven days a week” / Credit: TechCrunch

JD, of course, conjured up its own digital-first grocery store called 7Fresh. The supermarket opened this January and has since added three more locations, though JD’s founder and CEO Richard Liu had an ambition for 30 by the end of 2018. I recently visited one of them in Beijing and, as it turned out, it shares a lot of similarities with its opponent but also diverges in some aspects.

Unlike most supermarkets in China, the 7Fresh store I visited sits in a low-density community away from lively residential neighborhoods. You will need to drive or hail a taxi there, or do what JD.com wants you to — order online.

Upon arrival, you will immediately notice some of the Whole Foods rustic chic. An array of fruits, vegetables, fishes, meats, artisan bread, imported drinks lie graciously on wooden shelves, punctuated by 7Fresh’s dark green brand color.

Well, perhaps slightly more futuristic than its American counterpart.

The a-ha moment comes when you get to the fruit section, which lets you scan barcodes on meticulously wrapped items. Details of the fruit then pop up on a screen above your head, showing where it comes from, how sweet it is, and et cetera.

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Scan to get details on your fruits. / Credit: TechCrunch

It says this particular pear I have comes from China’s northeastern Liaoning province, with a sugar level at 8 to 12 percent, and is recommended by 99 percent of the customers who bought and reviewed it on the 7Fresh app.

Yes, to shop at 7Fresh, you must download its app and register an account. Hema exercises the same mandate. The implication is that shoppers will help themselves at checkouts, although there is still human staff on hand to assist the less digital savvy. The drill won’t be new to most Chinese people as millions of them already shop online and pay offline with their smartphones every day.

When done with scanning products, you pay with JD’s digital wallet or the more popular WeChat Pay, the payment solution linked to Tencent, a major shareholder in JD.

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Human staff assist the less digital savvy at self-checkouts. / Credit: TechCrunch

The 7Fresh app, of course, also lets you buy what’s in-store remotely. Customers who are less than three kilometers away can buy online with 30-minute delivery. In other words, the supermarkets are not stuck with store visit conversions.

“Customer conversions now take place anywhere within the three-kilometer range on people’s handsets. It’s all happening invisibly,” Zhao Heshan, a Shanghai-based farm produce supplier for several major Chinese ecommerce platforms, told TechCrunch.

Like Hema, 7Fresh doubles as a warehouse and distribution hub, and so is larger than the old-fashioned grocers, which focus on capturing in-store traffic.

The most forward-looking device in the store is arguably its ceiling conveyor belt – though it still requires human help. Once a customer places an order online, an in-store fulfillment staff packs it up in a bag and loads it onto the conveyor belt. The item then zooms across the store over your head to a nearby delivery center, a system that also powers Hema.

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7Fresh’s ceiling conveyor belt. / Credit: TechCrunch

As such, Hema and 7Fresh are going after users online and trying to digitize those who used to shop at brick-and-mortars. As of September, online sales account for more than 60 percent for Hema stores that are 1.5 years or older, Alibaba says.

With the addition of physical footprints, ecommerce players gain a deeper understanding of how people shop and can thus optimize logistics efficiency.

“Consumers in different regions behave differently, so 7Fresh uses that as a foundation and customizes inventory at each store accordingly,” said president of 7Fresh Wang Xiaosong to press when the first store opened.

Jack Ma came up with the catchphrase “new retail” to describe this online-and-offline retailing integration, and Richard Liu’s equivalent is “borderless retail.”

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Ceiling conveyor belt at Alibaba Hema. / Credit: Alibaba

Besides the much-coveted customer insights, Alibaba and JD are going offline for cheaper user acquisition. “The golden age of cheap internet traffic is gone. Now it’s the opposite. Customer acquisition is much cheaper offline,” suggested Zhao.

Both Alibaba and JD have continued their old playbooks at physical stores, with the former running a marketplace model that takes a cut from merchants, and the latter staying consistent with direct sales. That holds true to how the rivals handle deliveries. While Alibaba relies on a network of third-party logistics services, JD has its own in-house fleet, which could be costly to operate.

An offline push, however, could boost revenues for the online retailer. “Richard Liu often talks about feeding JD’s one million or so delivery staff. Growing online orders from 7Fresh could help him fulfill that promise,” Zhao observed.