The unshackling from JD.com is emblematic of the broader strategic withdrawal of the world’s largest retailer from markets where profitability has proven elusive. — Reuters
WALMART’S stake in Chinese eCommerce firm JD.com was once central to its China strategy. Now it is tearing up that playbook by unloading its entire US$3.74bil stake in one of China’s biggest online retailers, in another example of the volatile nature of its relationship with China.
The unshackling from JD.com is emblematic of the broader strategic withdrawal of the world’s largest retailer from markets where profitability has proven elusive. It follows the retailer’s exits from several big markets over the past few years, including Japan, Britain, Brazil and Argentina, which industry-watchers have attributed to Walmart’s difficulty in competing with nimble local rivals.
When Walmart took its initial investment in JD.com in 2016 it was struggling to scale its own eCommerce platform, Yihaodian, and gain a foothold in China’s rapidly growing online shopping market.
At the time, David Cheesewright, then chief executive officer of Walmart International, positioned the US$1.5bil deal as a move to improve Walmart’s competitiveness in China’s cutthroat retail sector and boost sales in its underperforming physical stores.
The deal, which was one of the biggest investments in a Chinese retailer by a US company, included the opening of a Sam’s Club China store on JD.com and access to JD.com’s distribution network for same and next-day deliveries.
The company’s reliance on JD.com to drive sales, however, has diminished since the pandemic, when home-bound Chinese consumers gravitated to Sam’s Clubs so they could stock up for possible lockdowns and make fewer trips to the store.
This trend has continued even post-pandemic, Walmart executives have said, with memberships at Sam’s Club hitting a record high in Walmart’s most recent quarter.
Sam’s Club, which opened its first store in Shenzhen in 1996, is the top warehouse club chain in China. Half of Walmart’s China sales come from online channels, the company has said, which include sales from JD.com, JD Daojia and its Sam’s Club app.
Even as Walmart is selling the JD.com stake, it will maintain a commercial relationship with the retailer, details of which were not immediately disclosed.
In contrast, Walmart has used its majority stake in Indian eCommerce marketplace Flipkart to proceed in the direction of an initial public offering. — Reuters
Siddharth Cavale writes for Reuters. The views expressed here are the writer’s own.
