Wal-Mart Stores Inc. (NYSE: WMT) has received approval from Chinese regulators to boost its stake in e-commerce company Yihaodian to 51%, according to the Wall Street Journal. The financial details of the acquisition have not been disclosed.
Walmart aims to improve its position in China’s business-to-consumer e-commerce space, which is expected to grow to $100 billion over the next two years. To make its investment in Yihaodian pay off, the world’s largest retailer will have to compete with established Chinese e-commerce sites like Alibaba (of which Yahoo! Inc. (NASDAQ: YHOO) still holds a stake of about 20%) and E-Commerce China Dangdang Inc. (NYSE: DANG).
Amazon.com Inc. (NASDAQ: AMZN) plays a big role in China’s online sales, and there are other privately held sites that also compete for sales. Amazon’s slowdown in international sales last quarter, including sales in China, are not an encouraging sign.
Another discouraging sign for online sales in China is the consensus estimate for Dangdang’s second quarter. The company is expected to report a net loss of $0.23 per share on revenue of $186.6 million next week.
By contrast Alibaba, which is privately held, reported a net profit of more than $220 million on revenue of $1.83 billion in the quarter ended in March. These numbers include both Taobao.com, Alibaba’s business-to-consumer site, and Alibaba.com, a B2B site. Taobao accounted for about two-thirds of the company’s revenues in 2011.
Walmart has its work cut out for it in China. An entrenched player coupled with a softening domestic economy is not a combination that will be easy to dislodge.
Walmart’s shares were up 0.4% at $73.70 in premarket trading this morning. The stock’s 52-week range is $49.94 to $75.24.
Paul Ausick
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