Wal-Mart to take majority stake in China e-commerce firm

Mon Feb 20, 2012 7:32pm EST
 
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By Melanie Lee and Donny Kwok

SHANGHAI/HONG KONG (Reuters) - Wal-Mart Stores Inc said on Monday it is taking a controlling stake in Chinese e-commerce firm Yihaodian, as the world's largest retailer seeks new revenue sources to fend off rising competition in the world's fastest-growing major economy.

The move comes two weeks after Wal-Mart announced the appointment of industry veteran Greg Foran as head of its China operations, capping a series of leadership changes at the unit, which has been tainted by food scandals, including a pork mislabeling issue last year that forced it to temporarily shut a dozen stores in central China.

Wal-Mart said in a statement that the fresh investment into Yihaodian will take its stake to around 51 percent and will be subject to government regulatory approval. Wal-Mart did not provide any financial details of the deal and it was not immediately clear how much stake it has now in the China firm.

"E-commerce has been booming for years in China and in many other sectors, and it has only been very recently that it is for supermarket type of goods," said James Roy, senior analyst from Shanghai-based China Market Research Group. "It is a good investment for Wal-Mart as it has a lot of potential."

Wal-Mart announced in May last year it planned to buy a minority stake in Yihaodian, a Chinese website selling consumer items and groceries.

"People who order from Yihaodian tend to be more premium customers and that is a decent direction for the company," Roy said. "It is an interesting move, showing that they are trying something new."

Yihaodian, with 5,400 staff, operates a logistics network in Shanghai, Beijing, Guangzhou, Wuhan and Chengdu. It serves a growing customer base with same-day and next-day delivery of essential daily items at competitive prices.

E-COMMERCE SURGE IN CHINA   Continued...

 
Employees stand in front of the gate to a Wal-Mart Supercenter in Chongqing municipality October 24, 2011. Wal-Mart stores in Chongqing reopened to surging crowds on Tuesday, two weeks after being shut down by local authorities for violating food and product standards. Picture taken October 24, 2011. REUTERS/Stringer