JD.com Completes Acquisition of Chinese Electronics Retailer 5STAR to Improve Omnichannel Capabilities

(Source: 5STAR)

Chinese second-largest e-commerce platform JD.com (JD) Monday announced the acquisition of the remaining 54% stake in compatriot home appliance store 5STAR, also known as Five Star. Combined with the previously acquired 46% of its equity, the new acquisition has made the Nanjing-based company a wholly-owned subsidiary of JD.

Established in 1998 with annual sales over 18 billion yuan, 5STAR is China’s third-largest electronics retailer following Nanjing-based Suning and Beijing company GOME. 5STAR has over 700 stores across eight provinces and regions, with online stores focusing on third- and fourth-tier cities. It has a particularly large footprint in China’s eastern region, especially in Jiangsu, Zhejiang and Anhui provinces.

5STAR used to be the Chinese partner of US online retailer Best Buy which purchased a majority interest in 5STAR in 2006. Best Buy in 2014 announced it had entered into a definitive agreement for the sale of its 5STAR business to Chinese investment group Jiayuan.

The partnership between JD and 5STAR can be traced back to 2017 when the two companies started to connect the e-commerce platform with offline retail stores. Then in 2018, the two parties started to build Omni-channel Experience Stores in cities including Luoyang, Hangzhou, Wenzhou, Fuzhou and more. Meanwhile, traffic of 5STAR stores during the 618 mid-year shopping festival of that year increased nearly 30% compared with a year ago, and sales increased by over 50%.

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JD has invested in offline retail enterprises such as 5STAR, GOME, DIXINTONG, and Lecoo over the past year. It has also launched multiple offline ventures such as JD E-Space, JD Home Appliance Store, JD Computer and Digital Store, and JD Home.

“The acquisition of the remaining shares of 5STAR will further optimize JD’s electronics and household appliances supply chain, and improve their omni-channel capabilities,” JD said in a press release on Monday. “In other words, JD hopes to create an offline JD.”

JD agreed to acquire a 46% stake in 5STAR in April 2019. The e-commerce titan signed the agreement with 5STAR’s existing shareholder Jiayuanchuangsheng Group to purchase shares worth 1.27 billion yuan, with a combination of cash and assumption of the shareholder’s debt, according to the SEC filing. JD also provided a 1.03-billion-yuan loan to Jiayuanchuangsheng, while the shareholder and 5STAR should give back JD certain collateral and investor rights.