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Walmart Seeks Faster China Growth Path In Deal With Alibaba Rival

Walmart Seeks Faster China Growth Path In Deal With Alibaba Rival

Walmart has agreed to sell its Chinese online operations to the country's second-largest e-Commerce company, JD.com, as it attempts to compete with retailing behemoth Alibaba. JD.com will take ownership of Walmart's Yihaodian marketplace platform, although Walmart will continue to operate the Yihaodian direct sales business and will be a seller on the marketplace.

As part of the deal, the Bentonville, Ark.-based retailer will take a 5% stake in JD.com. While Walmart's brick-and-mortar stores are not part of the deal, the planned strategic alliance is designed to drive traffic to both these stores and Sam's Club China locations. Sam's Club will open a flagship store on JD.com and offer same- and next-day delivery through JD.com's warehousing and delivery network, which covers a population of 600 million consumers, according to a company statement.

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Walmart opened its first store in China back in 1996, but the retailer currently operates only 430 locations throughout the country. Its Yihaodian marketplace has only a 1.5% market share in the online merchant-to-consumer marketplace, according to The Wall Street Journal.

It wasn't that long ago that Walmart seemed more inclined to work with Alibaba than compete against it. In May 2015, Walmart brought Alibaba's Alipay payment technology into 25 of its stores in Shenzen. At that time, the retailer said it planned to expand the Alipay Wallet mobile payment technology to more than 400 Walmart and Sam's Club stores across China.

For JD.com, the deal is a way to consolidate its number-two position behind Alibaba, which operates the consumer web site Taobao and the merchant-to-consumer online marketplace Tmall. JD.com's share of online sales to Chinese consumers is 23%, far below Tmall's 58% share, according to the Journal.

JD.com made its name as a place to buy brand-name electronics and has tried to expand its offerings. The Yihaodian acquisition gives it a leg up in the online grocery market, where competition has increased as many Chinese grocers have moved into e-Commerce.

It seems only fair that Walmart move more aggressively into the Chinese market, since Alibaba chairman Jack Ma revealed the company's intention to invest in U.S. e-Commerce startups in an interview in November 2015.

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