NEW YORK (AP) — Wal-Mart is partnering with China’s No. 2 e-commerce site as the world’s largest retailer seeks dominance in the extraordinarily lucrative, but increasingly competitive online marketplace.
The company said Monday that it was giving JD.com ownership of its Yihaodian e-commerce site in China, including the brand and app.
Wal-Mart’s Sam’s Club China will open a flagship store on JD.com, and both companies will leverage their supply chains and broaden the range of imported goods.
Wal-Mart stands to gain a tremendous amount of traffic from JD.com’s huge base customer base and its same-day delivery network. JD.com has a total of nearly 6,000 delivery and pickup stations in 2,493 counties and districts across China. Yihaodian owns and operates only about 250 hubs. Yet JD.com’s strength is in brand-name electronics, and it will be able to help capitalize on Yihaodian’s strong brand name and business in eastern and southern China and in key product categories such as groceries and household goods.
Wal-Mart Stores Inc., of Bentonville, Arkansas, will take a 5 percent stake in JD.com, or nearly 145 million newly-issued Class A shares in the Beijing company.
Wal-Mart took full control of Yihaodian almost a year ago after its first investment in the company in 2011 as it seeks to catch up in the country with a massive potential customer base. Wal-Mart wants to establish itself as a place to buy high quality food in the wake of a slew of safety issues in China.
As in the U.S., people in China are increasingly migrating online to shop for food. It’s a big reason why traffic has declined at Wal-Mart’s 400 stores there.
But Wal-Mart has struggled to win over those customers online, where competition is even fiercer.
Wal-Mart’s stake is very tiny overall. It has just 1.6 percent of China’s overall online market, ranking it as No. 6 well behind No. 1 powerhouse Alibaba’s 46.9 percent and second ranked JD.com’s 20.1 percent, according to Euromonitor International, a global research firm. Wal-Mart has been fighting Alibaba, JD.com, and a swarm of smaller, online food sellers.
Getting China right is key to strengthening Wal-Mart’s global online business, which has seen sales growth slow. Wal-Mart said recently that global e-commerce sales rose 7 percent in the first quarter, weaker than the 8 percent in the previous quarter and far below the 20 percent increases seen less than two years ago. It’s faced stiff challenges not only in China, but in Brazil and the United Kingdom as well.
Shares in JD.com surged 8 percent before trading was halted Monday.