Walmart ends online strategy in China with sale of its JD.com stake – The Indian Panorama

New York (TIP) – Walmart’s stake in Chinese e-commerce company JD.com was once central to its China strategy. Now the company is throwing that strategy out the window and selling its entire $3.74 billion stake in one of China’s largest online retailers – another example of the volatile nature of its relationship with China. The JD.com divestment is symbolic of the world’s largest retailer’s broader strategic retreat from markets where profitability has proven elusive. The retailer had previously pulled out of several major markets in recent years, including Japan, the UK, Brazil and Argentina, which industry observers attribute to Walmart’s difficulty competing with nimble local rivals. When Walmart made its first investment in JD.com in 2016, the company was struggling to scale its own e-commerce platform, Yihaodian, and gain a foothold in China’s fast-growing online shopping market.
At the time, David Cheesewright, then-CEO of Walmart International, described the $1.5 billion deal as a move to improve Walmart’s competitiveness in the highly competitive Chinese retail industry and boost sales at its underperforming stores. The deal, one of the largest investments by a U.S. company in a Chinese retailer, included the opening of a Sam’s Club China store on JD.com and access to JD.com’s distribution network for same-day or next-day delivery, the companies said in a joint statement.
But the company’s reliance on JD.com to boost sales has declined since the pandemic, as housebound Chinese consumers flocked to Sam’s Clubs to stock up for possible lockdowns and visit the store less often. That trend has continued even after the pandemic, Walmart executives said, with Sam’s Club memberships hitting a record in Walmart’s last quarter. Sam’s Club, which opened its first store in Shenzhen in 1996, is the largest wholesale club chain in China. Half of Walmart’s China sales come from online channels, including sales through JD.com, JD Daojia and the Sam’s Club app, according to the company.
Walmart said on Tuesday its decision to sell its JD.com stake “allows us to focus on our strong China businesses for Walmart China and Sam’s Club and deploy capital to other priorities.” Walmart’s other international priorities include doubling the amount of goods it sells in foreign markets to $200 billion over the next four years. The company is also working toward an initial public offering of its digital payments platform PhonePe and Flipkart marketplace in India. The JD.com divestment is also notable as a big first move by Kathryn McLay, who took over as CEO of Walmart’s international division last year, and it comes at a time when U.S.-China trade tensions coupled with geopolitical uncertainties have made China a more challenging trading partner. Several Western firms, including Walmart, are increasingly shifting their investments and sourcing from China to other developing countries, including India, Pakistan and Bangladesh, to improve the resilience of their supply chains.
Source: Reuters