Walmart is picking the right battle to fight in China. The USgiant is selling its local website to rival JD.com for $1.5 billion in stock. This is an abrupt U-turn. But battling China's internet titans would have been difficult and costly even for the world's largest retailer.
The $222-billion heavyweight is offloading online grocery arm Yihaodian to Beijing-based JD.com in exchange for a five per cent stake in the Chinese group. Walmart will continue to sell directly on the platform. But this is a rapid reversal: just last July, the company spent $760 million to buy out Yihaodian's founders and remaining shareholder. And as recently as March, Walmart's finance chief told investors that "marrying" online and offline assets in the People's Republic would be "very important".
Reality has set in, though. From a low base, grocery delivery has become one of the fastest growing and most hotly contested areas of Chinese e-commerce. Alibaba and the smaller JD.com, the two big online retail specialists, are both spending heavily on logistics so they can deliver groceries and other products quickly across the country.
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With no figures for Yihaodian, it is hard to assess the deal's financial merits. But the sale looks broadly in line with last year's increased investment. Meanwhile, Walmart can now concentrate on its 420 stores in China, its fourth-largest market by revenue.
For years, foreign groups from Carrefour to Tesco have been losing market share to Chinese rivals. But a turnaround is on the horizon: data from Kantar Worldpanel shows third-placed Walmart has returned to market-share growth this year. Better to focus on keeping this momentum up.
