In order to conquer the huge Chinese market, Walmart is counting on its strategic partnership with JD.com, while Amazon and Alibaba have found each other as well. A battle of the titans has erupted, and not just in China.
China's eCommerce and mobile payments growth are unparalleled in the world, but it is a very difficult market. All major retail groups are very interested in the Chinese online market, but they find it very difficult to gain a foothold. Walmart, with a Chinese presence since 1996 with both its Walmart and Sam's Club brands, also found that out the hard way - even though Walmart China has launched www.samsclub.cn and the Walmart To Go app (including mobile payment options) and even acquired local eCommerce company Yihaodian.
Admirable advances, but CEO Doug McMillon is not satisfied. He feels Walmart needs to succeed in a market that will contain 25 % of the world's retail growth over the next five years. He quickly realized Yihaodaian's market share (1.3 %) was no match for JD.com's 23 % and certainly not Alibaba's 58 %.
In order to increase its impact on the enormous Chinese market, Walmart has traded its Yihaodian shares for a strategic participation in JD.com, Alibaba's biggest rival and one of China's fastest-growing B2C online companies. Its annual growth averages around 40 % and it will reach a 35 billion euro turnover by the end of the year. Walmart recently increased its stake from 5.9 to 10.8 %, becoming JD's third largest shareholder, trailing founder Richard Liu and Tencent (Facebook's Chinese counterpart, with an impressive stock value of nearly 260 billion dollars).
Walmart and JD.com are currently working on three interesting projects in China: to begin with, Walmart has opened an exclusive Sam's Club on JD.com's powerful online platform, which has given customers all across China access to Sam's Club's products. Often, they receive those items same-day or next-day, giving Walmart access to a huge untapped market. On top of that, Sam's Club is set to open at least twenty brick-and-mortar stores across China by 2019.
A second project involved the opening of a Walmart Global Imports Store on the JD Worldwide platform, where Chinese customers can order Walmart products from the United States, Japan and the United Kingdom and get them delivered to their doorstep thanks to JD.com's logistics.
Moreover, Walmart entered a collaboration with New Dada, a low-cost delivery service like Uber and InstaCart. New Dada is actually a joint venture between JD Daojia (JD.com's online supermarket) and logistical service supplier Dada, allowing customers to order (fresh) food online at more than twenty Chinese Walmart stores and get it delivered at home within the next two hours. Unlike in the United States (with a mere 10 %), more than 50 % of Chinese consumers have already ordered food online, and JD.com's extensive experience with fresh food distribution provides a competitive edge over Alibaba.
Set sights on India and Europe
In light of the global competition between several major retail groups striving for world domination, Walmart's initiatives in China are interesting to behold. Amazon cannot rest on its laurels: Walmart's major American competitor cannot seem to get beyond a 1.5 % market share in China on its own, which is why it opened web shop on Alibaba's marketplace, Tmall. However, the impact of this move is currently quite limited.
China is not the only battlefield for these major retail groups: there is also India, which recently opened the door for foreign eCommerce investors? Walmart is already talking to Flipkart, India's largest eCommerce company, while Amazon and Alibaba are also getting ready to join the fray.
The same companies are also turning their attention to Europe. Walmart has made its second home in the United Kingdom, while Amazon is also targeting Germany and France. Alibaba has just opened several European offices, including one in the Benelux, which all seems like a prelude for an impending European flurry of retail moves. Fasten your seatbelts!