Technology

Chinese E-Commerce Giant JD.com Has Gaming Ambitions. This Is Its Strategy

Arjun Kharpal | CNBC
  • Chinese e-commerce giant JD.com is investing in its gaming business from partnering with companies to inform their device development to expanding their own e-sports team.
  • The Beijing-headquartered firm wants to be the go-to place for young people to buy gaming-related goods.
  • JD has struck partnerships with companies like Tencent as it seeks to build an "ecosystem" around gaming that will drive growth of its other businesses.

SHANGHAI — At China Joy, one of Asia's biggest gaming conferences held in Shanghai, e-commerce giant JD.com built a booth featuring the giant version of its dog mascot Joy, where gamers gathered to compete against one another.

The display underscores JD.com's ambition in the gaming space. But it's not looking to take on the likes of Tencent and NetEase by making games.

Instead, the Beijing-headquartered firm wants to be the go-to place for young people to buy gaming-related goods and it sees e-sports and partnerships with device manufacturers as a way to do that. This could also drive growth in other parts of its business.

"We have the capabilities to ... round up the entire ecosystem," Daniel Tan, president of JD Mobile Devices, told CNBC.

What JD is doing in gaming

There are a few aspects to JD's gaming business. Firstly, millions of shoppers buy products on JD's platform and give feedback. JD can work with partners to share that feedback to help them improve their products.

Last year, JD announced plans to work with companies such as Chinese PC-maker Lenovo and gaming giant Tencent to develop smartphones enhanced for mobile gaming. That means JD can also distribute these and target gamers through its shopping app.

The second part of the strategy revolves around e-sports or competitive video gaming.

JD launched its own e-sports team in 2017 called JD Gaming. Last year, it launched a mobile gaming team called JD Esports.

Global e-sports revenue is forecast to surpass $1 billion for the first time in 2021, growing 14.5% year-on-year, according to gaming analytics firm Newzoo. While it is still a small part of the overall global games market, growth is expected to remain strong. JD is hoping for a slice of this pie.

But its involvement in e-sports is also part of a broader marketing push to associate the company with gaming. E-sports has helped "to get into consumer mindsets," Tan said.

He added that the company is focusing on building up the profile of players "in a way to help us promote products."

"Ultimately, I think what we want to do is to build a platform where when you think about gaming anything you need on gaming you go to JD," Tan said.

JD is not in the business of producing and making games like Tencent or NetEase. Tencent in particular has grown globally by acquiring or investing in gaming studios. Tan said that is not JD's focus but did not rule out the possibility of co-investing in gaming companies with a partner.

"I think if there is an opportunity, if it is a good opportunity, we will consider … we are very open," Tan said.

JD sees 'huge potential' in gaming

Tan said JD's gaming efforts are in the early stage and that the company is not looking into a business model at this point.

"At the end of the day, I think the entire industry is still at the incubation stage. So from our perspective, it's investment," Tan said.

"But we do see a huge potential … it's not only selling of mobile phones, not in terms of revenue sharing on games … I think that's towards the end," he said.

What JD is doing is to try to create value, Tan said. "We need to incubate the entire ecosystem before we think about … how do you cash out."

Tan also said there were a lot of indirect benefits from investing in gaming.

"It's about participating, it's about being involved with young people, associating with young people. And that's the kind of consumers we want, you know ... they will use JD," he said.

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