NEW YORK (AP) – Wal-Mart is selling its Chinese online business to the country’s No. 2 e-commerce site in a strategic partnership that it hopes will bolster its presence in the extraordinarily lucrative but increasingly competitive online marketplace.
The company said Monday it is 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 section on JD.com, and both companies will leverage their supply chains and broaden the range of imported goods. Wal-Mart will take a 5 percent stake in JD.com, or nearly 145 million newly issued Class A shares in the company.
Wal-Mart Stores Inc. stands to gain a tremendous amount of traffic from JD.com’s huge customer base and its same-day delivery network. JD.com has nearly 6,000 delivery and pickup stations in about 2,500 counties and districts across China. Yihaodian owns and operates only about 250 hubs.
Though JD.com’s strength is in brand-name electronics, it will be able to help capitalize on Yihaodian’s strong brand name and business in eastern and southern China and in important categories such as groceries and household goods.
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Food is among the growing number of products that Chinese shoppers are increasingly migrating online to shop for, which is a big reason why traffic has declined at Wal-Mart’s 400 stores in China as well as at its rival’s big stores. Sam’s Clubs in China, which number 13, has been a bright spot in the China business, as the company focuses on affluent Chinese shoppers who have been embracing Western ways of shopping. Wal-Mart has sought to establish itself as a source for high-quality food in the wake of a slew of safety issues in China, and has highlighted imported food to cater to middle-class shoppers looking for premium goods.
Wal-Mart previously had just 1.6 percent of China’s overall online market, ranking it No. 6 – well behind powerhouse Alibaba’s 46.9 percent and JD.com’s 20.1 percent, according to research firm Euromonitor International. Wal-Mart had been fighting Alibaba, JD.com, and a swarm of smaller, online food sellers.