Wal-Mart Finds A Big Partner In China

Wal-Mart Stores, Inc. WMT is aggressively attempting to adapt to the global shift to e-commerce, and the company’s most recent move is to abandon its plans to take on the Chinese e-commerce market alone. Instead of fighting for market share in an extremely crowded and difficult environment in China, Wal-Mart has decided to turn over control of its Yihaodian Chinese e-commerce platform to JD.Com Inc(ADR) JD in exchange for a 5 percent stake in JD.

JD.com is the largest e-commerce rival to market leader Alibaba Group Holding Ltd BABA in China.

Wal-Mart will now have a pore passive stake in the Chinese online marketplace, although it will continue to operate the Yihaodian platform.

“Selling up in return for a 5 percent stake in JD.com is a good way of staying in the space while reducing the risk,”China Market Research Group analyst Ben Cavender explained.

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Wal-Mart has been taking similar steps in the United States and China to streamline its brick and mortar operations by closing locations that are struggling financially. Wal-Mart now operates more than 400 stores in China.

Alibaba’s Tmall currently holds 61.4 percent of China’s e-commerce market share, while JD.com holds 18.6 percent.

So far this year, Wal-Mart’s stock is up 16.4 percent, Alibaba’s stock is down 3.5 percent and JD.com’s stock is down 35.1 percent.

Disclosure: The author is long BABA.