China’s JD.com’s quest to expand into technologies such as artificial intelligence and automation is causing its expenses to soar, with the company seeing its Q2 technology costs go up over 70 percent year over year for the third consecutive quarter.
According to TechCrunch, the company spent 2.8 billion yuan, or $400 million on new technology, while net income slipped more than 50 percent to 478 million yuan, versus 977 million yuan last year. However, marketing and fulfillment, which usually make up most of the company’s operating expenses, grew at less than 30 percent over the same period.
While most of JD.com’s technologies are still in their testing phase, the company’s head of technology believes it can start to capitalize on these innovations when it can do things at scale.
“If there is no scale, there is saving,” Chen Zhang told a group of reporters in Beijing on Tuesday (November 6). “If you build something, you want other people to use that. It takes a lot of time to make a product perfect before you say it’s done. AI is all about iteration and how much data you get.”
In the meantime, the company will continue to work on new tech projects. Earlier this month, JD.com announced that it is teaming up with two schools to study distributed ledger technology’s (DLT) implications on business, Cryptovest reported. The Chinese eCommerce retailer is working with both the Chinese Academy of Sciences (CAS) and the New Jersey Institute of Technology (NJIT) for the joint lab, which will look into efficiency issues and scalability when it comes to the blockchain.
“This will include multi-year collaborative research efforts into fundamental consensus protocols, privacy protection and security in decentralized applications, among other areas,” JD.com said in a statement.
The company is also looking to expand overseas. In June, Google invested $550 million in JD.com as part of a partnership in which Google will promote JD.com products on its shopping service so that JD.com can expand beyond its two main markets of China and Southeast Asia.