Wal-Mart Plans to Sell Chinese E-Commerce Platform to JD.com

On Monday morning, shares of Wal-Mart Stores, Inc. (NYSE: WMT) increased 0.86% to $71.56, as the company is in discussion to sell its Chinese e-commerce platform which named Yihaodian to the second large Chinese online retailer JD. Com Inc. (NASDAQ: JD), according to Wall Street Journal. JD. com rose 6.35% to $21.41 during Monday morning trading.

This deal includes a broader partnership between two companies which would improve Wal-Mart’s competence in China and boost sales in its physical retail locations. Moreover, the partnership would also help JD. com to expand its offerings as it continues to compete with larger rival Alibaba Group Holding Ltd (NYSE: BABA).

Wal-Mart has struggled to build its China business as fast as hoped. The sale of Yihaodian comes as a surprise after Wal-Mart announced in July 2015 that it had taken full control the of venture from its minority partner, paying $760 million for the 49% stake it didn’t already own. Wal-Mart executives have said they want to move faster to grab a larger piece of the rapidly expanding online and mobile Chinese shopping market, slowing the growth of their store expansion in the country. Wal-Mart has worked to link its physical operations to Yihaodian’s online operations to keep pace with Chinese consumers who are more rapidly adopting online which could continue in a bigger way after a partnership with JD.com.

Wal-Mart recently named Dirk Van De Berghe as head of the Walmart China business. Dirk serves as president and CEO of Walmart Canada and his appointment will become effective August 22, 2016. He will also serve as regional president for the company’s Asia business, including Walmart Japan.

JD. com, which gained popularity from its reputation as a place to buy brand-name electronics, has tried to expand its offerings as it continues to compete with the larger Alibaba, which operates consumer-to-consumer site Taobao and merchant-to-consumer marketplace Tmall.

JD. com has been chipping away at Alibaba’s market share, and its revenue growth has outpaced Alibaba for the past seven quarters. According to data from consulting firm iResearch, JD. com’s market share in sales of products online to consumers is approximately 23%, compared with TMall’s 58%. E-commerce platform Yihaodian won 1.5% market share in the online merchant-to-consumer sales segment. The move further helps consolidate JD.com’s No. 2 position, while it competes for market share against Alibaba’s TMall. Yihaodian was founded in July 2008, and Wal-Mart acquired a stake in 2012.

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