The Chinese retail industry is a highly competitive one, and although Walmart has succeeded in the United States, it is in the middle of completely changing up its online e-commerce strategy overseas.
The world’s largest retailer announced on Monday that it is selling its Chinese online e-commerce marketplace platform, Yihaodian, to JD.com Inc.. JD.com is currently the No. 2 e-commerce company in the country behind Alibaba Group Holding Ltd., with the hope that this move will help them close the gap.
In return for the platform, JD.com will give Walmart a 5% stake in the company. The shares are valued at around $1.5 billion based off of the company’s current market price. The two companies will collaborate when it comes to running the direct-to-retail aspect of Yihaodian.
“The reality is that e-commerce is hyper-competitive in China and it is tough for any platform to make money,” said Ben Cavender from China Market Research Group. “Selling up in return for a 5 percent stake in JD.com is a good way of staying in the space while reducing the risk.”
Walmart is hoping that JD.com will have better luck with the Yihaodian platform, which only controls a 1.5% market share in online merchant-to-consumer sales in China. The move could also allow Walmart to more effectively integrate its Sam’s Club division into the online platform with the help of JD.com.
As primarily an online retailer for electronics, JD.com will be hoping that the expansion into online grocery sales will help them continue to take market share away from Alibaba. Yihaodian isn’t the only online groceries platform that JD.com has invested in, either, with an investment also made in FruitDay.
Walmart has been struggling in China, but they’re hoping that this strategic move will help them increase their market share in the country.
