Wal-Mart Makes Savvy Investments in Growing Chinese e-Commerce Market

Wal-Mart (NYSE:WMT) has increased its stake in Yihaodian, a fast-growing online retailer of groceries, consumer electronics and apparels, to 51%. Presently, the Chinese e-commerce market is dominated by Taobao.com, a subsidiary of the Internet giant Alibaba. Wal-Mart has been aggressively looking to increase its online sales and has taken several initiatives past year in this regard. Wal-Mart competes with other big retailers like Target (NYSE:TGT), Costco (NASDAQ:COST) and Best Buy (NYSE:BBY). Online retailers like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY) are also serving as stiff competition to Wal-Mart.

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Chinese E-Commerce Market

According to a study by Boston Consulting Group, China’s e-commerce industry is expected to surpass $118 billion in gross merchandise value in 2011. By 2015, the Chinese e-commerce market is most likely to surpass the U.S. e-commerce market. China’s low cost of shipping is expected to provide a further boost to this growing market and could be a key reason that Wal-Mart is looking to expand its online role. Currently, approximately 173 million people shop online in China, which still is a small portion of China’s total population. ((See: Wal-Mart to take majority stake in China e-commerce firm, Reuters))

Yihaodian Ensures Increased Share in Chinese Online Market

A majority stake in Yihaodian would enable Wal-Mart to synchronize its physical presence with its online efforts. Yihaodian operates next-day delivery service for essential daily goods at competitive prices. It sells more than 180,000 products with its logistics network bases located in Beijing, Shanghai and Guangzhou. Aside from this, Wal-Mart operates in China through its 300 stores.

We believe increasing its stake to a majority stake will help Wal-Mart in further strengthening its presence in the Chinese e-commerce market.

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