Walmart Sells Its Entire JD.com Stake – Implications

Over the past week, I have been thinking about Walmart selling its entire JD.com stake unexpectedly. The implications of this decision have not been described adequately, nor have the future impact been discussed. What are the consequences for both Walmart and JD.com?

This story started in 2011 when Walmart made an undisclosed minority investment in Yihaodian. In 2015, Walmart acquired the remaining shares in the e-commerce platform Yihaodian for an undisclosed amount. It is important to note that in June 2015, the Chinese government started allowing total foreign ownership of some e-commerce businesses. This decision was to encourage foreign investment and competition in the e-commerce sector. In 2016, Walmart sold Yihaodian to JD.com and acquired 5% of JD.com stock at a valuation of $1.5B. The company also started a strategic partnership with JD.com.

The strategic partnership included:

  • JD.com will acquire the Yihaodian marketplace platform assets, including the brand, website, and app. At the same time, Walmart will continue to operate the Yihaodian direct sales business and sell products in the marketplace.
  • Sam’s Club China plans to open a flagship store on JD.com, expanding its high-quality imported products availability in China, offering same- and next-day delivery through JD.com’s nationwide warehousing network.
  • Walmart and JD.com are partnering to enhance product selection across China by leveraging their supply chains and expanding the range of imported products.
  • Walmart will be listed as a preferred retailer on JD.com‘s O2O JV Dada, boosting online traffic and allowing customers to order fresh food and items for 2-hour home delivery while maintaining its physical stores.

Source: Walmart

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The E-commerce Stepchild – Logistics

I have spent a large amount of time in 2020, researching and writing about logistics. In a recent project, I have had a front-row seat to see its strain on brands. The stepchild of e-commerce is not flashy and visible by consumers but can make or break customer perception. The final mile has an enormous impact on consumers’ experience, and in Q4 2020, it will become more critical.

Logistics is somewhat opaque currently, and in most cases, it can lead to many breaking points. Amazon has changed customer perceptions based on speed. On-demand startups such as Darkstore, FLEXE, and Flowspace also add complexity, which the customer does not see.

The sector is a low margin, capital intensive part of commerce that is due for innovation. It’s a topic that is not cool, nor does it get the attention it deserves.

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Why I am changing my thesis on Chinese ecommerce

Over the last 18 months, I have been reading, researching and talking to ecommerce investors about China. Why? I am fascinated by the market as Chinese ecommerce is both unique and a look to the future.

China is unique

GDP growth

Economically China in my mind is bordering on a miracle. 6% growth consistently over 25 years which some years growing even more. I have realized that China has moved from being a factory based economy to a market that is reliant on consumption. The consumption has lead to the creation of businesses that are huge economically and only focused on creating wealth for their shareholders and the Chinese population. These businesses have to toe the line with the Chinese government.

If the GDP growth slows, Chinese consumption would have grown $2.3 Trillion by 2020.

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