Wal-Mart Strikes Deal to Sell Chinese E-Commerce Business to JD.com
Wal-Mart and JD.com would cooperate on the direct-to-retail part of Yihaodian’s business
JD.com Inc., JD 6.46 % which is the second-largest online retailer in China after Alibaba Group Holding Ltd. BABA 2.13 % , is in talks to buy Yihaodian from Wal-Mart in an all-share deal, according to the people. The deal’s terms would have JD.com issue shares valued at roughly $1.5 billion to Wal-Mart, equivalent to roughly 5% of JD.com’s outstanding shares, according to one of the people familiar with the matter. Wal-Mart and JD.com plan to cooperate on the direct-to-retail part of Yihaodian’s business under this scenario, the person added.
The deal is expected to be announced as early as Monday in the U.S., according to the person.
JD.com’s American depositary receipts were up 6.5% at $21.43 on the Nasdaq Stock Market at midday Monday.
Wal-Mart has struggled to build its China business quickly. The retailer opened its first store in the country in 1996 but only has about 430 there today. Yihaodian, meanwhile, has a slim 1.5% market share in the online merchant-to-consumer sales segment, according to data from consulting firm iResearch.
In the most recent quarter ended April 30, Wal-Mart’s China sales in existing stores rose slightly, said David Cheesewright, chief executive of Walmart International, speaking to investors earlier this month. “That’s an improving trend,” he said, citing the weak Chinese economy and strong local competition. About 10% of Wal-Mart’s China sales come from Sam’s Club, a warehouse chain format the company hopes to grow locally.
Wal-Mart has planned to integrate its Sam’s Club stores more closely into its online e-commerce platform in China, a move that could be expanded by teaming up with JD.com.
JD.com has been chipping away at Alibaba’s market share, and its revenue growth has outpaced Alibaba for the past seven quarters. Still, its market share in sales of products online to consumers is about 23%, compared with TMall’s 58%, according to data from consulting firm iResearch.
The move further helps consolidate JD.com’s No. 2 position while it competes for market share against Alibaba’s TMall.
Yihaodian’s niche has been grocery sales, but competition in the groceries segment has heated up in the past year, as local Chinese retailers have gone online and many startups have entered the field to sell things as diverse as imported avocados and dishwashing detergent.
JD.com has bolstered its food offerings, for example, through its investment in FruitDay, a Chinese online produce retailer, and is expanding imports, including signing deals with Australian milk companies and U.S. meat and vegetable producers.
Yihaodian was started in July 2008, and Wal-Mart purchased a stake in 2012.