Walmart is taking another crack at China’s e-commerce market by rolling out two-hour delivery services with Alibaba Group’s smaller competitor JD.com.
The Bentonville, Arkansas-based supermarket chain started its online push in China in 2011, when it bought a stake in Chinese online supermarket operator Yihaodian. The partnership, however, failed to give it a significant share in the country’s booming e-commerce market.
Last year,Yihaodian had a mere 1.3% of China’s two trillion yuan business-to-consumer online shopping market, according to Beijing-based consultancy iResearch. JD had 23% while Alibaba had 58%.
Now Walmart is trying to win market share by offering the express service with JD.com. The company announced today that more than 20 of its 423 stores in the country will provide the service for customers ordering on New Dada, a joint venture JD.com established last year with logistics site Dada, with the number expected to double by year end. Walmart also said it will open a Sam’s Club store on JD.com and sell imported products on the site’s cross-border e-commerce unit, JD Worldwide.
The move comes after Walmart nearly doubled its stake in JD.com from 5.9% to 10.8% in October. It first invested in the Chinese site in June, selling its Yihaodian marketplace to JD.com in exchange for 145 million of JD’s newly issued shares, which were worth about $1.5 billion based on its share price then.
The U.S. company is competing with e-commerce giant Alibaba for a slice of China’s burgeoning online grocery market, which grew 80% to reach 49.7 billion yuan last year, according to Beijing-based consultancy iResearch. About 50% of Chinese consumers have bought groceries online, compared with just 10% in the U.S., according to consultancy McKinsey.
Last year, Alibaba’s shopping site Tmall announced that it would invest 1 billion yuan ($161 million) to offer same-day grocery deliveries for residents in Beijing. A number of sites, including Sequoia China-backed Aixianfeng and the Baidu-backed Womai.com, are also competing for more market share, and no clear leader has emerged so far.
“Walmart and JD.com have an advantage here because JD’s logistic services have handled a lot of fresh food deliveries and the Walmart brand can help to gain consumer trust,” said Zhang Yi, founder of Guangdong-based consultancy iiMedia Research.
China’s online grocery companies, however, are not that profitable. Last year, only 7% of China’s online grocery sites have reported a profit, as most are struggling with the high cost of cold-chain delivery, a technology that keeps food fresh during transportation, according to an iiMedia report published last year.
