Wal-Mart rips up China online plan

New York/ Shanghai, June 21: WalMart Stores has sold its Chinese onlinegrocery store in return for as take in the country’s No. 2 e-commerce firm, ripping up its previous strategy in efforts to cure ailing sales in one of the world’s toughest retail markets.

The deal will see the US grocery giant swap its Yihaodian platform for a 5% stake in JD.com, worth about $1.5 billion by the fir m’s latest market value. The move also gives Wal-Mart a ringside seat in JD.com’s bitter rivalry with Chinese e-commerce leader Alibaba Group Holding.

The sell-off, announced on Monday, is a significant shift for Wal-Mart in China, where it operates more than 400 brick-and-mortar stores. The firm has been shuttering under performingoutlet sand grappling with soft online sales in the world’ s second biggest economy since it bought full control of Yihaodian in July last year, saying the site would play a leading role in its China strategy.

“The reality is that e-commerce is hyper-competitive in China and it is tough for any platform to make money,” said Ben Cavender, Shanghaibased principal of China Market Research Group. “Selling up in return for a 5% stake in JD.com is a good way of staying in the space while reducing the risk.” The deal echoes a strategy adopted by other international retailers and consumer goods makers — selling a local unit for a stake in a Chinese partner in order to prosper in a cut-throat marketplace. France’s Danone sold its Dumex brand last year to raise its stake in local dairy giant China Mengniu Dairy.

Wal-Mart’s tie-up gives it access to JD.com's nationwide logistics and warehousing networks, as well as its over 150 million users—helpingUS firm’ s reach with China' s increasingly tech-savvy middle class.

Under the deal, JD.com will issue around 145 million class A shares to W al-Mar tandi twill take ownership of Yihaod ian, although the platform will be operated by Wal-Mart. Reuters