Wal-Mart & JD.com Expand Online Shopping Options In China

Wal-Mart Stores Inc. (NYSE:WMT) , in collaboration with Chinese eCommerce website, JD.com Inc., will offer more shopping options for online customers in China as part of their strategic alliance.

Wal-Mart will leverage JD.com’s nationwide logistics network and stock Sam’s Club merchandise in JD’s warehouses. This will enable Wal-Mart to reach the untapped market of China, complementing its commitment to open 20 more Sam’s Clubs locations by 2019. On the other hand, all JD.com consumers will be able to buy Sam’s Club products at membership prices during a 10-day introduction period following the official launch on Nov 11.

In addition, a Walmart Global store will be launched on JD Worldwide, JD.com’s cross-border platform, which will enable Chinese consumers to access a wide variety of Wal-Mart’s imported products from around the world.

Further, Wal-Mart will offer a two-hour delivery service for customers ordering on JD Daojia, the grocery and fresh goods business of the New Dada joint venture with JD.com.

It seems Wal-Mart is aggressively foraying into eCommerce in China with an aim to deliver goods from its stores around the world to Chinese consumers within hours. The recent association with JD.com will bring together the largest retailer, Wal-Mart’s huge customer base and JD.com’s unparalleled same-day delivery network and reputation for authentic products. This will thus further improve Wal-Mart’s logistics and supply chain functions, cross-border eCommerce and online-to-offline (O2O) eCommerce services for consumers across the country.

JD.com is the second-largest online retailer in China after Alibaba Group Holding Ltd. (NYSE:BABA) in terms of market cap. In June, Wal-Mart inked a deal with JD.com to sell its Chinese eCommerce business, Yihaodian to JD.com in exchange for a 5% equity stake in the company. Later on Oct 6, Wal-Mart increased its stake in Chinese eCommerce website, JD.com Inc., to 10.8% from 5.9%, aiming to grab more market share in the world’s largest online market and expand its reach in China, where the company has been struggling of late.

Bentonville, AR-based retailer opened its first store in the country in 1996, but only has about 430 stores there at present. The company has stated various reasons for the sluggish business operations in the region.

In China, the company has long been dealing with food safety scandals despite trying to maintain high food safety standards. Wal-Mart China too has been facing significant pressure from government austerity measures and deflation. Further, the company faces problems in understanding discerning Chinese consumers as their buying decisions aren’t always price driven.

The expanded deal with JD.com is expected to offer Wal-Mart a better chance of competing in the cut-throat retail industry in China and expand its reach in the country. Evidently, it expects to generate 25% of global retail growth from the region over the next five years.

Apart from expansion in China, Wal-Mart is leaving no stone unturned to dominate eCommerce king, Amazon.com, Inc. (NASDAQ:AMZN) . In this regard, it continues to make huge investments in eCommerce initiatives, including acquisitions. Recently, Wal-Mart completed the acquisition of eCommerce company, Jet.com, Inc. in the U.S. and is also in talks to acquire a stake in India's largest eCommerce firm, Flipkart Online Services Pvt., in order to expand in the fast-growing online retail market.

Zacks Rank

Wal-Mart currently carries a Zacks Rank #4 (Sell). A better-ranked stock in the retail industry is Tilly’s Inc. (NYSE:TLYS) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tilly’s has an average positive earnings surprise of 73.74% in the trailing four quarters. It also has a long-term earnings growth rate of 15.50%.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>