Wal-Mart aims to increase holding in online retailer
Updated: 2012-02-21 10:16
By Tang Zhihao (China Daily)
SHANGHAI - The US retailing giant Wal-Mart Stores Inc is looking to acquire a controlling interest in Yihaodian, a Chinese online retailer.
An advertisement for the online retailer Yihaodian in Shanghai. Wal-Mart Stores Inc is waiting for approval from Chinese regulators to increase its stake in Yihaodian to 51 percent. [Photo/China Daily]
The move is aimed at boosting Wal-Mart's online sales in the Chinese market and maintaining its competitiveness in the country's e-commerce sector.
In a statement, Wal-Mart said it plans to increase its holding in Yihaodian to 51 percent. The US retailer said the move is awaiting approval from the Chinese regulatory authorities.
In a telephone interview with China Daily, Yu Gang, chairman and founder of Yihaodian said the increase in Wal-Mart's stake will not result in significant changes in personnel. Neither company revealed any financial details about the move.
Yu also denied that Ping An Insurance (Group) Co of China, one of Yihaodian's major shareholders, will sell its entire stake to Wal-Mart. It has long been rumored that the insurer was seeking to sell its 60 percent stake in Yihaodian to Wal-Mart.
Yu said the Yihaodian brand will remain a separate unit and independent in China.
Yihaodian is one of the fastest-growing e-commerce business operators in China. Its sales revenue reached 2.7 billion yuan ($429 million) in 2011, increasing from 4.17 million yuan in 2008. In 2010, Ping An acquired an 80 percent share of Yihaodian, valued at 80 million yuan.
Wal-Mart acquired a minority holding of approximately 20 percent, valued at $65 million, from Ping An in 2011.
Peng Jianzhen, deputy secretary-general of the China Chain Store and Franchise Association, said the development of online trading platforms has become a must for large retailers in recent years, because it is the shopping model preferred by the younger generation.
Retail giants including Carrefour SA and Groupe Auchan SA have developed online shopping systems to compete in the Chinese market.
Peng said Wal-Mart's increased investment in Yihaodian will help to maintain the profitability of traditional stores that have higher operating costs than online stores.
"Generally, price differences will exist for the same products when sold online and in traditional brick-and-mortar stores, and that has a negative impact on the sales performance of traditional stores," said Peng. "However, the dual-brand development strategy will help Wal-Mart to maintain profitability in traditional brick-and-mortar stores and help it to better develop in the e-commerce sector."
Wal-Mart is investing heavily in developing its presence in the Chinese e-commerce sector. The retailer has reached an agreement with the Shanghai municipal government to establish an e-commerce office in the city to oversee its online retail operations in China.
Neil Ashe, president and chief executive officer of Wal-Mart Global eCommerce, said, "This investment further enables Wal-Mart to deliver a superb customer experience to Chinese consumers that are already connected to the world through smartphones and social media. We are on track to create the next generation of e-commerce, offering the latest in online innovations to give our customers a unique shopping experience."