Wal-Mart Stores, Inc. (NYSE:WMT)’s Investment in JD.Com Inc (ADR)(NASDAQ:JD) that has lifted its claim in China’s second-largest e-commerce company to 10.8% from 5.9% doesn’t come as a major surprise. The move shows that WalMart is leaving nothing to chance in it are campaign to grow its online business.
WalMart has boosted its stake in JD only a few months after it sold its Chinese e-commerce operation called Yihaodian to JD. The sale of Yihaodian to JD earned Wal-Mart a 5% equity stake in JD.
The exact value of Wal-Mart Investment in JD.Com wasn’t disclosed, but it continues to cement the relationship between the two companies as they try to claw market share away from Alibaba in China’s massive e-commerce industry. Alibaba is currently the largest e-commerce operator in China and JD is its archrival.
Wal-Mart Investment in JD.Com could boost U.S. retailer’s China fortunes
Wal-Mart has been struggling to gain ground in China and it seems that the company has figured out that investing in successful domestic e-commerce companies can boost its fortunes in the market. Since entering China’s retail market in 1996, Wal-Mart has only opened 430 retail outlets in the country.
Food safety scandals are some of the factors that have slowed Wal-Mart’s growth in China. But it is betting that JD can help it overcome those hurdles especially now that the company is looking to generate 25% of its global retail sales growth in the Asian region in the coming five years.
“We believe this strategic alliance will help us grow e-commerce even faster in China,” said a Wal-Mart spokeswoman in reference to the investment in JD.
Wal-Mart investment in JD comes at a time when the U.S. retailer is aggressively pursuing e-commerce opportunities in other countries. The company is said to be on the verge of making a $1 billion investment in India’s e-commerce operator Flipkart. Amazon is battling Flipkart for the control of India’s burgeonoming e-commerce market.
Amazon intends to invest $5 billion to growth its operations in India. On its part, Wal-Mart plans to funnel $11 billion to capex in 2016 and 2017 with the bulk of the spending going to e-commerce acquisitions and fulfillment facility build-out.
Wal-Mart stock eased 0.14% in the last session to $71.67. Wal-Mart investment in JD news could move the stock in today’s session.
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