--- title: "Walmart China's E-commerce Struggles: From Dismissal to Heavy Investment to Compromise—What's the Point?!" description: "Building its own e-commerce business has clearly not worked out for Walmart. Walmart and JD.com are now trying to open physical stores together, with four co-branded stores currently in operation: three Walmart JD Home stores and one Walmart JD Exclusive Store. The question remains: what kind of fruit can such a shallow level of cooperation bear? The day after Walmart announced a projected 40% growth in U.S. online sales for the next fiscal year ending January 2019, Chen Wenyuan, who had been president of Walmart's hypermarket business in China for just over six months, disclosed in a media interview the innovations and adjustments in Walmart's China hypermarket business, with deep integration with JD.com to bridge online and offline as a top priority, along with efforts in new formats like compact stores." author: "楚不留香" publisher: "New Distribution" email: "zhaobo258@gmail.com" telephone: "+8615854817671" published: "2017-10-16" language: "en" canonical: "https://xinjignxiao.com/en/articles/walmart-china-s-e-commerce-struggles-from-dismissal-to-heavy-investment-6d573d58/" markdown: "https://xinjignxiao.com/en/articles/walmart-china-s-e-commerce-struggles-from-dismissal-to-heavy-investment-6d573d58.md" original_source: "https://mp.weixin.qq.com/s/-PxSBoOz9270PiQa5d-69w" translation: "https://xinjignxiao.com/zh/articles/%E6%B2%83%E5%B0%94%E7%8E%9B%E4%B8%AD%E5%9B%BD%E7%94%B5%E5%95%86%E5%A4%B1%E6%84%8F%E8%B7%AF-%E4%BB%8E%E4%B8%8D%E5%B1%91%E4%B8%80%E9%A1%BE%E5%88%B0%E5%A4%A7%E5%8A%9B%E6%8A%95%E5%85%A5%E5%86%8D%E5%88%B0%E5%A7%94%E6%9B%B2%E6%B1%82%E5%85%A8-%E5%9B%BE%E5%95%A5%E5%95%8A-6d573d58.md" attribution: "New Distribution — https://xinjignxiao.com/en/articles/walmart-china-s-e-commerce-struggles-from-dismissal-to-heavy-investment-6d573d58/" usage_policy: "https://xinjignxiao.com/ai-policy.txt" --- # Walmart China's E-commerce Struggles: From Dismissal to Heavy Investment to Compromise—What's the Point?! > Building its own e-commerce business has clearly not worked out for Walmart. Walmart and JD.com are now trying to open physical stores together, with four co-branded stores currently in operation: three Walmart JD Home stores and one Walmart JD Exclusive Store. The question remains: what kind of fruit can such a shallow level of cooperation bear? The day after Walmart announced a projected 40% growth in U.S. online sales for the next fiscal year ending January 2019, Chen Wenyuan, who had been president of Walmart's hypermarket business in China for just over six months, disclosed in a media interview the innovations and adjustments in Walmart's China hypermarket business, with deep integration with JD.com to bridge online and offline as a top priority, along with efforts in new formats like compact stores. Building its own e-commerce business has clearly not worked out for Walmart. Walmart and JD.com are now trying to open physical stores together. Currently, four co-branded stores have been opened: three Walmart JD Home stores and one Walmart JD Exclusive Store. But the question remains: what kind of fruit can such a shallow level of cooperation bear? The day after Walmart announced a projected 40% growth in U.S. online sales for the next fiscal year ending January 2019, Chen Wenyuan, who had been president of Walmart's hypermarket business in China for just over six months, disclosed in a media interview the innovations and adjustments in Walmart's China hypermarket business, with deep integration with JD.com to bridge online and offline as a top priority, along with efforts in new formats like compact stores. In fact, since Walmart opened its first physical store in China in 1996, its policies in China have undergone multiple adjustments. Although cautious and steady, it missed the booming opportunities in China's retail sector. Its e-commerce strategy has also shifted from "e-commerce poses no challenge to Walmart" to heavy investment to compete head-on with Amazon, and then to compromising in the Chinese market, forced to give up the opportunity to independently develop e-commerce, leaving only the path of cooperating with JD.com. **Frustrated E-commerce Ambitions** In May 2011, Walmart acquired a 17.7% stake in Yihaodian from China Ping An, entering China's e-commerce business. In August of the following year, Walmart increased its stake in Yihaodian to 51.3%, becoming its largest shareholder. It wasn't until the departure of Yihaodian's management, including Yu Gang and Liu Junling, that Walmart formally took control. **In fact, by acquiring Yihaodian, Walmart aimed to integrate online and offline O2O, leveraging its strong offline retail network combined with the largest FMCG e-commerce platform online.** Walmart's core advantage lies in its global supply chain and procurement system's bargaining power, which can minimize costs. Coupled with its over 400 stores across China, it can continuously distribute goods. However, after the acquisition, numerous problems emerged: online and offline orders and inventory could not be coordinated, and cultural differences made integration difficult. In reality, as an e-commerce platform, rapid response is essential, but offline Walmart operates a traditional retail system with a completely different order-driven model; at that time, inventory sharing was also not feasible. More critically, there were differences in development philosophy between Walmart and Yihaodian's founding team. Walmart intended to turn Yihaodian into a path to explore internet-based customer reach in China, serving as an O2O outlet, while the founding team tried to transform it into a comprehensive e-commerce platform but did not receive Walmart's support. With the e-commerce landscape solidified and market growth slowing, Walmart sold Yihaodian to JD.com. **On June 21, 2016, JD.com and Walmart reached a deep strategic cooperation: JD.com transferred 5% of its equity in exchange for Walmart's strategic cooperation and most of Yihaodian's assets.** Based on JD.com's stock price at the time, this strategic deal was valued at approximately $1.5 billion. JD.com was then facing pressure from Tmall/Taobao and Suning, and allying with Walmart could directly counter that. Walmart's experience in operating physical stores and its powerful systems and supply chain were also coveted by JD.com. From taking a stake in Yihaodian, to controlling it, and then selling it, Walmart's efforts were not particularly successful. At the moment of the sale, it also meant giving up the opportunity to independently develop e-commerce in China. Subsequently, Walmart continued to increase its stake in JD.com. **Increasing Stake in JD.com: How Far Can They Go Together?** In February 2017, documents JD.com filed with the U.S. SEC showed that as of December 31, 2016, Walmart held 12.1% of JD.com's Class A common shares, representing 10.1% of total Class A and B shares, making it the third-largest shareholder. At that time, JD.com's largest shareholder was Tencent, followed by Liu Qiangdong. This was Walmart's second increase in its stake in JD.com within six months since the strategic investment agreement in June 2016. Previously, Walmart had announced increasing its Class A common shares in JD.com to 10.8% and obtained observer status on JD.com's board. This continuous increase was interpreted not merely as financial investment but as strategic shareholding. It also signaled that Walmart regarded JD.com as a key component in its domestic e-commerce layout. Based on Liu Qiangdong's current 18.2% stake in JD.com, he holds at least 80.9% of voting rights. Even if his shares are severely diluted, as long as he holds 4.75% of JD.com's equity, he effectively holds sway over JD.com. This model of cooperating to expand e-commerce in China differs from Walmart's approach in the U.S. and overseas, where it has transformed through acquisitions and mergers. Over the past year or so, Walmart has acquired online retailer Jet.com for $3 billion in cash; apparel e-commerce site Shoebuy for $70 million; outdoor gear retailer Moosejaw for $51 million; menswear brand Bonobos for $310 million; and women's fashion e-commerce ModCloth, among others. Especially on October 3 this year, Walmart completed the formal acquisition of New York logistics company Parcel, enabling direct head-on competition with Amazon's Prime membership in the U.S. According to Walmart's latest data, in Q1 and Q2 of 2017, Walmart's online retail GMV growth rates were 63% and 67%, respectively, with monthly buyer visits currently at 110 million. In 2016, Walmart's total sales in China grew 5.4%, comparable sales grew 2.3%, and comparable average transaction value grew 5.2%. Cooperation between Walmart and JD.com is also deepening. In October last year, Walmart launched on the "JD Daojia" platform. As of July this year, 134 Walmart stores in nearly 18 cities across China have been connected to "JD Daojia." What JD.com might seek from cooperating with Walmart is Walmart's global bargaining power and supply chain system. Of course, **if Walmart contributes its core resources and capabilities to JD.com and helps it grow, will that suppress Walmart itself?** Of course, with its current stake in JD.com, Walmart's influence is quite limited. In the future, the two sides need deeper binding cooperation to truly integrate physical stores and O2O platforms across products, inventory, supply chain, and other aspects. This is likely not an easy task. Of course, Walmart and JD.com are also trying to open physical stores together. Currently, four co-branded stores have been opened: three Walmart JD Home stores and one Walmart JD Exclusive Store. **But the question remains: what kind of fruit can such a shallow level of cooperation bear?** The **2017 (3rd) FMCG + Internet Conference** will be held in Chongqing in November 2017. Centered on the theme "New Forces, New Ecosystem," the conference will invite **over 1,000 distributors, 500 brand owners, founders of 200+ B2B platforms, and 100+ investment and financing institutions** to jointly explore a new chapter of cross-industry integration! Click the link below to review the highlights of the 1st and 2nd FMCG + Internet Forums: [2016 "FMCG + Internet" Summit Forum]() -END- --- ## Copyright and AI use This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL. Contact: zhaobo258@gmail.com · +86 158 5481 7671