Is Wal-Mart Exiting China With The Yihaodian Sale?
Wal-Mart (NYSE:WMT) announced last week that it is selling its Chinese e-commerce platform Yihaodian to Chinese online retailer JD.com (NASDAQ:JD). Under this deal, Wal-Mart would get $1.5 billion worth of shares in JD.com, which translates into a 5% stake.
Last year, Wal-Mart took 100% ownership of Yihaodian – up from its previous 51% stake – with the intention of increasing its presence in China’s e-commerce space. But it has been struggling since then to increase its market share due to competition from players such as Alibaba (NASDAQ:BABA) and JD.com. Though it may appear at first glance that Wal-Mart is preparing to leave the Chinese market, this will be more of a partnership than an outright sale.
Key Points:
- Wal-Mart China gets access to JD.com’s networks and more than 100 million users by getting listed as a preferred seller on JD website.
- Sam’s Club China will launch a flagship store on JD.com’s website.
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JD.com is strong in northeast China, while Yihaodian has a better hold in the southeastern part of the country. This strategic alliance should not only help JD expand its customer base but also get better access to U.S goods that it sells on its website.
According to global consumer products research firm IGD, China is the world’s largest grocery market and is expected to grow from $1.1 trillion a year to $1.5 trillion per year by 2020. [1] China already has many local players in the e-commerce market, and big retailers such as Wal-Mart have found it difficult to compete.
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