Only a few months after Walmart (WMT) sold its Chinese e-commerce platform to JD.com, the two companies have laid out their plan for helping the U.S. Discount retailer finally crack China’s online market.
Walmart on Thursday announced a number of initiatives with JD.com, China’s second largest e-commerce website after Alibaba (BABA), that among other things will help it deliver goods to some 90% of China’s population, and maybe even use drones for delivery in remote areas in some cases. Other projects include launching a Sam’s Club store on JD.com on Friday and offering two-hour delivery from Walmart stores in a few cities.
These projects, telegraphed by Walmart in June, are being rolled out in the run up to Singles Day on November 11, a massive e-commerce shopping day in China that now eclipses Cyber Monday in the United States in sales volume.
The American company has been trying for years to conquer the Chinese market, one that is essential at a time its domestic business has matured and sales in a number of other international markets are sluggish. In June, Walmart took a 5% stake in JD.com in exchange for selling its platform, Yihaodian, in the hopes of tapping its Chinese partner’s large base of online shoppers and same-day delivery infrastructure.
There are only about 430 Walmart stores in China, a tiny presence compared to its 4,000+plus U.S. Stores, and the deal with JD.com, which has about 200 million active users, is a way to kick start its growth in a promising market of 1.4 billion people.
“China remains a strategic focus for us as it represents the largest retail growth opportunity globally,” Wal-Mart Stores Chief Executive Officer Doug McMillon told investors in August. In the most recent quarter, comparable sales in China slipped 0.5%. What’s more, earlier this month, McMillon warned Wall Street that heavy investments in e-commerce globally, including a “sharpened focus on China” would stunt profit growth for a couple of years.
Walmart will rely on JD.com’s extensive logistics and delivery network to reach new shoppers. JD.com founder and CEO Richard Liu told Bloomberg News that the company wants to build automated warehouses and distribution centers, self-driving delivery cars and drones. A JD.com spokesman told the agency that some customers in remote areas could have Walmart and Sam’s Club orders flown to them. That would help Walmart reach customers outside the markets where it operates stores.
“The scale of the last mile here in China is unique — the economics related to it are different,” McMillon told Bloomberg.
Other components of the companies’ plans include opening 20 more Sam’s Club stores by 2019, and offering guaranteed two-hour delivery to customers living near 20 Walmart stores at first, with more likely to come later.