Wal-Mart to hike stake in China’s firm

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 mislabelling 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 per cent 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. With 173 million Chinese people shopping online, China’s e-commerce industry is expected to surpass 750 billion yuan ($118 billion) in gross merchandise value in 2011, more than the gross domestic product of Vietnam. It is expected to become the world’s largest e-commerce market in 2015, Boston Consulting Group said in a report. “Our further investment in Yihaodian demonstrates that we are committed to investing in China in a key growth industry and developing all that goes with it: logistics, infrastructure, innovative talent and new technologies...,” Neil Ashe, President and CEO of Walmart Global eCommerce, said in the statement.