Walmart seeks online growth in China

21 February 2012

BEIJING: Walmart, the retail giant, is strengthening its ecommerce capabilities in China, anticipating a potential surge in revenues as the country's internet audience rapidly expands.

The US multinational has recently increased its investment in Yihaodian, an online retail platform selling more than 180,000 products from grocery to baby care.

Subject to government approval, Walmart could soon own 51% of Yihaodian, giving it control of the site. Neil Ashe, president/CEO of Walmart Global eCommerce, argued this would offer considerable benefits.

"This investment further enables Walmart to deliver a superb customer experience to Chinese consumers that are already connected to the world through smartphones and social media," he said.

Yihaodian offers a same-day and next-day delivery service in major cities like Beijing, Guangzhou, Shanghai and Wuhan, and its sales stood at RMB2.7bn ($429m) last year, up from RMB805m just 12 months earlier.

"This is testament to how seriously Walmart is developing its ecommerce platform in China. Having a controlling stake obviously gives it a much more direct say in how Yihaodian expands," Torsten Stocker, a partner at Monitor Group, the consultancy, said.

Over 170m people currently shop online in China, and the Boston Consulting Group has predicted that category sales will climb from $118bn in 2011 to $315bn by 2015.

Analysys International, the research firm, has also argued the ecommerce market - led by players like Taobao and 360buy - would increase in value from $38bn to $125bn between 2011 and 2014,

James Roy, senior analyst at the China Market Research Group, said: "It is a good investment for Walmart as it has a lot of potential.

"People who order from Yihaodian tend to be more premium customers and that is a decent direction for the company … It is an interesting move, showing that they are trying something new."

More specifically, Yuji Fung, an analyst from the Oriental Patron Financial Group, suggested that Yihaodian's existing storage and delivery capabilities offered a considerable advantage to its new senior partner.

"Since Yihaodian already has its own logistics and is very popular in Beijing and Shanghai, the deal is very positive for Walmart," he said.

Data sourced from Financial Times, Reuters; additional content by Warc staff