CHINA TOPIX

11/21/2024 06:05:19 pm

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Walmart Sells Chinese E-Commerce Business to Alibaba's Rival

Walmart partners with JD.com.

(Photo : Reuters)

US retail giant Wal-Mart is moving toward another strategy that would give it better footing in the lucrative Chinese market.

The world's biggest retailer announced Monday that it is selling Yihaodian, the company's Chinese e-commerce platform, to JD.com, China's biggest e-commerce site next to Alibaba.

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"We're excited about teaming up with such a strong leader in JD.com, and the potential that this new relationship creates for customers in China," Doug McMillon, Wal-Mart's CEO, said in a statement.  

The transaction will give Wal-Mart 5% ownership share in JD.com, which is valued at around 9.86 billion yuan ($1.5 billion), based on JD.com's recent share price.

Despite its effort to penetrate the Chinese market, there are only 430 Wal-Mart stores in the country so far, a pittance compared to the 4,000-plus stores the company maintains in the United States.

Wal-Mart's deal with JD.com gives the commerce giant a fresh start to boost its growth in the Middle Kingdom. 

The agreement gives JD.Com the control over the Yihaodian brand and website. Wal-Mart, meanwhile, will take charge of Yihaodian's direct sales business. It will also be allowed to sell its products on the website.

JD.Com's traffic is expected to boost Wal-Mart's reach into the Chinese market. Sam's Club China will also have open its store on JD.Com, tapping its delivery network to enable same day delivery.  

The deal with Wal-Mart gave JD.com's depositary shares a boost, rising by 4.6% to 138 yuan ($21.06) on the Nasdaq. Wal-Mart shares have seen slight improvement to 367 yuan ($71.10) on the New York Stock Exchange.

In recent years, Wal-Mart has found it difficult to expand its market beyond the American borders, although a third of its 3.169 trillion yuan ($482.1 billion) annual sales are derived from the overseas market.

Wal-Mart opened its first stored in China in 1996. However, foot traffic to the Chinese stores has been on a steady decline for nine consecutive quarters, despite an increase of spending per trip among shoppers.

Note: As of June 21, 2016, US$1 is worth approximately 6.58 yuan. 

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