Wal-Mart enters China e-commerce business

As China's e-commerce sector is booming, foreign retailers are positioning themselves to grab a piece of the cake. The world's biggest retailer, Walmart, is boosting its stake in the popular Chinese supermarket website Yihaodian, hoping to win more Chinese shoppers.

Walmart closed the deal with Chinese online supermarket Yihaodian last week, and now owns 51 percent of the company. The move underlines Walmart's determination to be a bigger player in China's fast expanding e-commerce sector, as well as in the retail market.

Neil Ashe, president & CEO of Wal-Mart Global e-Commerce, said, "Sam's Club currently operates online, and we'll continue to operate there but our emphasis for e-commerce will be at Yihaodian. Our goal isn't necessarily to be the biggest online retailer but to be the best."

Analysts say the partnership provides a shortcut for Walmart's e-commerce ambitions in China in terms of localization, which is a key to success.

Lu Zhenwang, CEO of SH Wanqing Consultancy, said, "It's unlikely that Walmart could start its online store in China from scratch. Yihaodian has and e-commerce-ready distribution system, warehouse infrastructure, a large pool of registered users, as well as a lot of experience in purchasing local Chinese food products."

George Ren, partner & VP for Greater China, Roland Berger Strategy Consultants, said, "There're lots of local food brands, and local food assortment, and this is not the traditionally strong area for international retailers - how to do the assortment smartly and give the Chinese consumer what they really want."

Walmart recently announced its opening 100 new stores in China in the next three years, a rate slower than the 50-60 stores a year that it had been opening recently. But Walmart is not the only one slowing its expansion in China. Experts say foreign supermarkets are re-evaluating their return on investment rates, as they struggle to win over the Chinese consumer from their local competitors. Currently foreign supermarkets - Walmart, Tesco and Carrefour alike - all lag behind local chains in terms of market share.