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Walmart Becomes Majority Shareholder in Chinese Online Retailer Yihaodian

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(Photo: Asif Akbar)
(Photo: Asif Akbar)

BUSINESS

  • Walmart increases ownership in Yihaodian to almost 51%
  • Yihaodian hopes to better meet customer needs with Walmart’s expertise
  • Walmart sees fourth-quarter profit margins fall due to its lower retail pricing strategies

Walmart Stores Inc has increased its shares in Yihaodian, a fast-growing B2C e-commerce website in China, to bring Walmart's total ownership stake to almost 51% – nearly one year after it purchased a minority share in the same e-retailer.

Yihaodian offers over 180,000 products and runs logistics centers in Shanghai, Beijing, Guangzhou, Wuhan and Chengdu, along with delivery stations in 34 cities across China.

In a statement to the press, Neil Ashe, President and CEO of Walmart Global e-commerce, said: “This investment further enables Walmart to deliver a superb customer experience to Chinese consumers that are already connected to the world through smartphones and social media. We are on track to create the next generation of e-commerce, offering the latest in online innovations to give our customers a unique shopping experience.”

While the transaction is still subject to Chinese government regulatory approval, Yihaodian’s Co-Founder and Chairman Gang Yu indicated he felt that Walmart’s near 50 years of retailing experience and its “innovative technology and e-commerce solutions” would help Yihaodian better address the needs of its customers.

Junling Liu, Co-founder and CEO of Yihaodian, said in a recent press conference: "Walmart will share its knowledge and technology together with its best-in-class practices in retail and transfer them to Yihaodian's existing organization, leveraging these synergies with our local market expertise to deliver enhanced product offerings, lower prices and a better shopping experience for our customers."

With products including online grocery sales as well as items in categories such as baby/mom, consumer electronics and apparel, Yihaodian earned first place for Deloitte Technology Fast500 Asia Pacific and first place for China Entrepreneur Magazine's Future Stars of China Enterprises in 2011.

Lower Prices Mean Lower Profits for Walmart

As Walmart continues to pursue its market strategy of guaranteeing the lowest prices on merchandise, the world’s largest retailer reported fourth-quarter profit that trailed analyst estimates, hurting overall margins, with shares falling the most they had in six months.

However, despite lower profit margins, Walmart remains optimistic about its decision to lower prices throughout the store. According to the retail giant, this is just one compromise companies will have to consider as the global economy struggles.

According to Walmart CFO Charles Holley: “There will continue to be pressure on margins as the company works to wring out costs and offer low prices. We may see margins come down more than expenses in some quarters and expenses come down more than margins in other quarters. However, we’re not going to match expense reduction with margin reduction.”

Key Statistics – Ecommerce in China (source: yStats.com)

  • By 2015, the number of internet users in China is anticipated to reach over 600 million.
  • With online shopping on the rise in China, the number of internet shoppers in that country is expected to rise to more than 300 million by 2015.
  • Of all the Chinese B2C e-commerce retailers, Tmall.com, 360buy.com and Amazon.com rank as the top-three leaders.
  • With the rise in smartphone sales and increasing usage of 3G networks, China continues to see an increase in mobile shopping.

By Laurie Juliano-Bachara for
Laurie Juliano-Bachara is a Chicago-based writer who covers the latest topics in professional services, entertainment and business news.

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