Walmart is planning to sell the Chinese division of its eCommerce platform to Alibaba’s competitor JD.com, China’s second largest eCommerce company, sources told The Wall Street Journal.
The deal is reportedly part of a strategic partnership between the two companies, which will see Walmart pocket roughly $1.5 billion — the estimated worth of Yihaodian, Walmart’s Chinese eCommerce platform — and will see broader collaboration between the two companies.
The partnership is expected to better position Walmart in the ferocious Chinese retail market after years of struggling to make its place in the retail sector of the country.
The Arkansas-based company opened its first store in China in 1996 and since then has only been able to expand to 430 stores, according to WSJ. With stiff competition from eCommerce competitors, Walmart reportedly bought the remaining 49 percent stake in eight-year-old Yihaodian for $760 million to gain full ownership of the company last year, and build a better grip over the Chinese market.
The undertaking, of course, didn’t pan out for the American retail giant. Its Chinese eCommerce website just has a 1.5 percent market share in the country, according to iResearch, a research consulting company, WSJ pointed out.
If the deal works out, Walmart is expected to push for a broader integration of Sam’s Club, its membership-format wholesale chain, with JD.com. Currently, Sam’s Club sources close to 10 percent of Walmart China’s annual sales.
For JD.com, the deal would mean an expanded reach in the Chinese market and a stronger infrastructure to further bite into Alibaba’s share. For the last seven quarters, JD.com has been beating Alibaba in revenue growth, but is still far from cutting itself a bigger share of the eCommerce market. It only holds 23 percent of the market share versus 58 percent held by TMall, Alibaba’s eCommerce website.