Walmart ups stake in China e-commerce group

Shoppers leave a Walmart store in Beijing, China, on January 3.

Story highlights

  • Walmart has more than 350 stores in China
  • It remains a relative novice in e-commerce in the United States
  • Amazon leads the market there

Walmart is taking a 51% stake in Yihaodian, a leading Chinese e-commerce website, in a significant move by the U.S. retailer to boost its online presence in China.

Walmart did not disclose financial details for the partnership, which Neil Ashe, president and chief executive of Walmart Global e-commerce, said would help deliver a "superb customer experience" to consumers in China.

"This is testament to how seriously Walmart is developing their e-commerce platform in China. Having a controlling stake obviously gives them a much more direct say in how Yihaodian expands," said Torsten Stocker, an analyst with the Monitor Group.

Founded in 2008, Yihaodian is one of the fastest growing companies in China, selling more than 180,000 products ranging from grocery items to consumer electronics and apparel. Yihaodian, in which Walmart already held a minority stake, runs logistics centers in Shanghai, Beijing, Guangzhou, Wuhan and Chengdu and is able to offer same-day and next-day delivery. The Chinese consumer e-commerce market is dominated by homegrown online retailer Taobao.

Walmart remains a relative novice in e-commerce in the United States where the market is led by Amazon. Online sales account for a tiny percentage of Walmart's total U.S. revenues, but in the past year it has sought to boost its in-house expertise by acquiring two U.S. technology companies: Kosmix, which specializes in organizing information from social media sites such as Facebook, and Small Society, which develops apps for mobile shopping.

While Walmart's website sells dried and packaged food as well as general merchandise for delivery across the US, its only involvement in selling fresh food online is a small pilot program launched in San Jose, California, last year.

Walmart has more than 350 stores in China, where it has been making steady progress. In the three months to the end of October it reported a 16.1% increase in China sales from the previous year, but although individual shoppers were spending more money on each trip, visitor numbers were down 7.1%.

The company this month appointed Greg Foran, a 30-year industry veteran, as the chief executive of its China business. Mr Foran will take over next month. His predecessor, Ed Chan, stepped down in October, the fourth senior-level departure for the China business in six months.

In October, Walmart China closed its stores in Chongqing for a fortnight after the local government found it had mislabeled ordinary pork as organic. "Monitoring Walmart is as effective as punching cotton," Tang Chuan, head of enforcement at the Chongqing Administration of Industry and Commerce, told Xinhua news agency at the time.

Mr Ashe said that, in addition to helping Walmart's e-commerce goals in China, the increased investment in Yihaodian would "further contribute to China's domestic consumption, help stabilize prices, and advance expansion in the middle and western regions" of China -- a nod to Beijing's oft-repeated desire to make progress on these goals in the current Five Year plan.