Is WAL-MART Turning The Helm Late In The Chinese Market?

Increase Holdings

More than 10% shares and the observer status of the Jingdong board of directors, so that Jingdong in the country

The position in the structure adds a layer of chips, and WAL-MART's business ambitions are becoming more apparent.

As a global retail giant, is WAL-MART steering late?

Jingdong holdings in China

Although the last cooperation with Jingdong has yet to see any obvious signs, it does not prevent WAL-MART from continuing to watch the domestic electricity supplier and bet.

WAL-MART recently disclosed information about its holdings of Jingdong shares in its latest regulatory document to the US Securities and Exchange Commission (SEC).

After the increase, WAL-MART has about 10.8% of Jingdong's shares.

In June 21st this year, Jingdong and WAL-MART jointly announced a deep strategic cooperation. WAL-MART's "No. 1 store" was incorporated into Jingdong, while WAL-MART gained about 5% of Jingdong's shares.

According to the disclosure, according to the undisclosed provision, if WAL-MART's shareholding increased to a level equal to 10%, WAL-MART could participate in the Jingdong board meeting as an observer.

The terms of the agreement emphasize the long-term importance of cooperation between the two companies.

The paction also indicates that Jingdong hopes to deepen cooperation with WAL-MART.

It is understood that the terms of the paction also include an effective mutual non competition agreement in the next eight years to prevent the two companies from starting or investing in competing businesses.

People familiar with the matter say that if the state of the enterprise is not suitable for awarding seats on the board, investors can be "observer of the board" to obtain information they need to know, without having to bear any practical responsibility for making decisions.

The earlier paction between WAL-MART and Jingdong has already been confirmed. WAL-MART can get the status of the board observer by holding shares.

Prior to that, Tencent was the only company in the strategic partnership of Jingdong with a board seat.

Global buy and sell

In fact, Jingdong holdings is only one of the global layout of WAL-MART.

In August this year, WAL-MART bought Jet.com with $3 billion in cash and $300 million in WAL-MART shares. Some cash and all stocks will be paid in installments. The deal is expected to be completed in the fourth quarter of this year.

Jet said its aim is to provide consumers with lower prices than Amazon or WAL-MART.

WAL-MART has got the technology, infrastructure and management team needed by the electricity supplier business, and Jet co founder and CEOMarcLore will take over WAL-MART's e-commerce business.

The deal is regarded as WAL-MART CEODougMcMillon's emphasis on the future of online shopping.

McMillon said at a conference call that retailers get more young, wealthy and urban consumers through Jet.

In fact, for the WAL-MART that advocates "low price every day" and wants to catch up with Amazon, the biggest significance of the acquisition is the acquisition of the unique discount pricing system developed by Jet.com and the co founder and CEOMarcLore of Jet.

According to reports, this year's 45 year old Lore, before founding Jet.com, served as the chief financial officer of Quidsi, the parent company of Diapers.com, which was bought by Amazon in 2010 at a price of $550 million.

As part of the paction, Lore has worked for Amazon for five years.

Until last year, he founded Jet.com that wanted to "subvert Amazon".

Obviously, WAL-MART and Jet share a common choice on this goal.

WAL-MART, a traditional retailer, is more than enough in the business of e-commerce, and acquiring mature enterprises through the golden dollar policy is the most rapid way to intervene in the electricity supplier market.

According to data, WAL-MART has acquired 15 business start-up companies since 2011.

The most recent purchase of WAL-MART's list is Flipkart, a India electricity supplier.

Flipkart is the largest online retailer in India. WAL-MART is willing to invest $1 billion in Flipkart.

India is considered to be the next important online retail market after the US and China. In June of this year, Amazon CEO Jeff Bezos announced that it plans to invest another $3 billion in India to snatch users.

Electricity supplier rush March

After the cooperation with Jingdong in June, WAL-MART highlighted the results in the two quarter earnings report, the electricity supplier income 11.8%, higher than the 7% growth level in the previous quarter, the same period Amazon's net revenue reached 30 billion 400 million dollars, up 31% over the same period.

Last year, WAL-MART's sales revenue reached $14 billion, only 3% of its total annual revenue of $482 billion, while Amazon's revenue last year exceeded $107 billion, most of which was revenue from e-commerce.

The urgency of WAL-MART's electricity supplier is partly due to the challenge from Amazon, and a large part of the slowdown in the growth of physical retail sales.

In the 2015 quarter ended January 31st, WAL-MART's annual revenue declined 0.7% to $482 billion 100 million.

According to S&PCapitalIQdata data analysis firms, this is the first annual revenue decline of the company in at least 35 years.

WAL-MART's $482 billion 100 million operating income is equivalent to five times that of Amazon in the same period. But according to data provided by eMarketer, WAL-MART's online retail sales in 2015 amounted to about 14 billion US dollars, only 14% of Amazon's $99 billion product and service revenue, and WAL-MART's online growth rate has declined for fifth consecutive quarters.

Recently, WAL-MART said it plans to implement another US $11 billion capital expenditure plan in the next fiscal year, which will put a lot of money into technology, services and e-commerce.

BrettBiggs, chief financial officer of WAL-MART, said that only 20% of the company's investment will be put on the opening of new stores in the future, and more investment will be used in the e-commerce business of the development company.

Can you catch up later?

WAL-MART started to launch Walmart.com 15 years ago. Although WAL-MART has spent billions of dollars to build e-commerce business, WAL-MART has always been based on traditional retail entities, and has not put the electricity supplier in the winning position.

But now it is different. WAL-MART has slowed down for 9 consecutive quarters, compared with the 15% growth in the US electricity market, while Amazon's growth rate is over 30% during the same period.

Target, another big chain supermarket group, although the electricity business revenue last year is only 2 billion 500 million US dollars, is growing at a speed of about 30%.

The situation of China's electricity supplier is that it has dropped from the high growth rate of 782 billion 560 million yuan of online retail sales and 53.7% year-on-year growth in 2011, but it still has double-digit growth. In 2015, the scale of e-commerce market in China reached 16 trillion and 200 billion yuan, an increase of 21.2%.

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As far as China's business is concerned, in fact, WAL-MART is well prepared for the layout of China's electricity supplier market. In 2011, WAL-MART negotiated all the negotiations on Jingdong for more than half a year, valuations and so on, but failed because Jingdong could not accept the terms of gradual acquisition of the whole market.

After that, shop No. 1 was held in WAL-MART's arms until it was wholly owned. However, it did not bring good opportunities for WAL-MART to develop in China. The online retail distribution cost of food products was high and the gross profit was low. It was difficult to make profits. Finally, No. 1 store was sold to Jingdong by WAL-MART.

The development of the domestic electricity supplier from the beginning of 2011 to the beginning of today's pattern has begun. There will be fewer mobile phones outside the siege. Cooperation is the best choice.

When the two sides announced strategic cooperation in June, WAL-MART made it clear that the cooperation will greatly expand its growth opportunities in the Chinese electricity supplier market.

Analysts believe that further Jingdong holdings can also be seen as WAL-MART's efforts to abandon self built electricity providers outside the US market and rely entirely on acquisitions or partners.

Reporters noted that WAL-MART's self built "WAL-MART" App, currently only cross-border products in Beijing, many commodities have been sold out, even in the golden week called "eleven" consumption season, there is still no replenishment.

According to the strategic cooperation between WAL-MART and Jingdong, WAL-MART China's physical stores have access to Jingdong group's crowdsourcing logistics platform "dada" and O2O e-commerce platform "Jingdong home", and the highly valued Sam member store in China has also been settled in Jingdong.

For WAL-MART, which is betting on China's electricity supplier market on Jingdong, the increase is just the beginning. How to advance cooperation will win the cake in mouth.