Wal-Mart strikes strategic alliance worth $1.5bn with China’s JD.com
US retail giant Wal-Mart Stores Inc has confirmed plans to sell Yihaodian, it’s Chinese e-commerce business, to China-based digital retailer JD.com Inc in a deal worth $1.5bn (c.£1.2bn).
In exchange for Yihaodian, JD.com will give Wal-Mart a 5% stake in its business by issuing it with around 145m new class A shares, worth around $1.5bn, in a new strategic alliance designed to boost the US company’s access to the Chinese market.
Yihaodian, which focuses on grocery sales and caters to an affluent female demographic, saw Wal-Mart first acquire a stake in 2011 before taking on full ownership in July 2015, according to Reuters.
By partnering up with JD.com, which is the second-biggest online retailer in China behind Alibaba Group, Wal-Mart has given the Chinese firm control of the Yihaodian website and brand. Wal-Mart, meanwhile, will continue operating Yihaodian’s direct sales business and will sell on its marketplace.
Further to the deal, the Chinese arm of American retail warehouse chain Sam’s Club will launch a flagship store on JD.com and take advantage of its delivery network.
Wal-Mart’s Chinese store network will be listed as a preferred retailer on O2O JV Dada, JD.com’s crowd-sourced platform.
Speaking to Reuters, Brian Yarbrough, an analyst with financial services firm Edward Jones, said the deal gives Wal-Mart a more cost-effective way to get its products and brand in the marketplace by teaming up with a big, experienced player.
He continued: “It doesn’t mean that they’ve pulled away, but to me it tells me they are trying to make smarter investments.”