JD Acquires Yihaodian Through Strategic Alliance With Walmart

Chinese e-commerce titan JD announced Monday that they have inked a strategic partnership with Walmart to better tap Chinese market through a combination of e-commerce and retail.

Under the deal, JD will take control of Yihaodian, an online grocery sales platform that Walmart took full ownership in July last year. JD will take over the Yihaodian brand, website and app, while Walmart will continue to operate the Yihaodian direct sales business and will become a vendor on the Yihaodian marketplace.

In exchange, Walmart will grab a 5% equity stake in JD by acquiring about 145 million shares in the online retailer, worth around $1.5 billion USD at JD’s current valuation.

In addition, the partnership covers more diversified cooperation. Walmart’s Sam’s Club China will open a flagship store on JD and offer same- and next-day delivery through JD’s nationwide warehousing and delivery network. Walmart’s China stores will be listed as a preferred retailer on JD’s O2O unit Dada, China’s crowd-sourced delivery platform.

For JD, Yihaodian’s brand and business in eastern and southern China and in key product categories such as high-quality grocery and household goods will improve its geographical and product strengths. On top of that, Walmart’s offline and overseas resources will form a strong complement to boost its O2O and globalization initiatives in competition against Alibaba.

For Walmart, the tie-up brings more opportunities for the U.S. retailor to reshape its operations in China by capitalizing on JD’s online traffic and offline delivery networks.

Yihaodian was founded in 2008 by Liu Junling and Yu Gang, two former executives of Dell. JD’s acquisition is one of a series of equity changes during the company’s troubled growth. The platform sold an 80% stake to insurance company Shenzhen Ping’an for 80 million yuan due to a lack of funding in 2010.

Walmart purchased a 17.7% stake in the company in 2011, and then gradually increased their stake to 51.3% in 2012 before fully acquiring the company last year. However, the company has seen growth slow since Walmart’s acquisition, accounting for only 1.4% of China’s online retailing market, according to China Briefing.

While Yihaodian has missed opportunities to develop into cross-sector e-commerce giants like JD, it holds an important spot in the e-commerce hypermarket vertical. Therefore, it becomes an asset of strategic importance in the e-commerce behemoth’s expansion plans, especially into the online supermarket and fresh produce sectors.

“We believe that this tie up will increase both product selection and overall user experience. We look forward to further developing Yihaodian, which has tremendous strength in important regions of eastern and southern China,” said Richard Liu, CEO of JD.com.