BEIJING (Reuters) - JD.com Inc (JD.O), China's No.2 e-commerce firm, said it would invest $397 million in fashion retailer Farfetch UK Ltd to expand its luxury offerings, amid fierce competition with Alibaba Group (BABA.N) for China's high-end retail market.
JD will become a major shareholder in the UK firm following the transaction and its CEO Richard Liu will join Farfetch's board, it said in a statement.
Farfetch will be integrated into JD's existing logistics and marketing systems and the former will also employ JD's online finance tools, including payment service JD Pay and microcredit feature Baitiao, the statement added.
"All of these things [Farfetch] doesn't have on a global basis and they certainly don't have in China," Winston Cheng, head of JD's international business, told Reuters. "With the rising household income [in China] we think the timing is good"
The deal comes as JD is looking to broaden its offering of luxury and branded consumer goods, heating up the competition with its largest domestic rival Alibaba that has expanded heavily into branded goods with its online marketplace Tmall.
JD initially gained popularity as a retail platform for electronics and appliances, but it has since leveraged its extensive in-house logistics network to expand into a range of products including grocery, apparel and on-demand services.
Just this month, JD launched its high-end delivery service, JD Luxury Express, where staff in suits and white gloves deliver packages directly to customers' homes using electric vehicles.
The Farfetch deal is in line with JD's push as the online UK fashion retailer is partnered with roughly 700 global luxury brands and boutiques.
"This partnership addresses the market's challenges by combining the Farfetch brand and curation with the scale and influence of the foremost Chinese e-commerce giant," Farfetch CEO Jose Neves said in the statement.
In an interview last year, Neves told Reuters he anticipated a possible Farfetch IPO within two or three years.
The online luxury retailer - which counts France's Eurazeo, Singapore sovereign wealth fund Temasek [TEM.UL] and China's IDG Capital among its investors - was valued at around $1.5 billion in a fund-raising last year.
Reporting by Cate Cadell; Editing by Himani Sarkar