Coverage: Wal-Mart ups stake in Chinese online retailer

Wal-Mart Stores Inc., the world’s largest retailer, has increased its stake in JD.com, China’s No. 2 e-commerce site, to 10.8 percent, up from 5.9 percent.

Anne D’Innocenzio of the Associated Press has the news:

The move comes four months after Wal-Mart bought an initial stake in JD.com in a deal that also gave JD.com ownership to its Chinese company Yihaodian e-commerce site, including the brand and app.

Wal-Mart is trying to improve its business in China, which is lucrative but increasingly challenging.

Wal-Mart, based in Bentonville, Arkansas, aims to boost global online growth. It recently closed on a deal to buy fast-growing U.S. online retailer Jet.com for a purchase price of $3 billion.

Maria Armental and Juro Osawa of The Wall Street Journal reported that the stake will give the world’s largest retailer an observer status at JD’s board meetings: 

Under the terms of that deal, a person familiar with the matter told the Journal, the U.S.-based retail giant could increase its stake, gaining observer status. The only JD.com strategic partner that currently has a board seat is Chinese internet company Tencent Holdings Ltd.

On Wednesday, Wal-Mart disclosed in a regulatory filing that it had increased its stake to about 10.8%, highlighting the importance of its alliance with JD.com in its long-term strategy in China.

While online shopping continues to expand in China, which has surpassed the U.S. as the world’s largest e-commerce market, the Chinese market is still dominated by domestic competitors such as JD.com and Alibaba Group Holding Ltd., the largest e-commerce company.

Last year, China’s online retail spending reached $589 billion, compared with $334 billion in the U.S., according to Forrester Research, a Cambridge, Mass., market-research firm.

Lulu Yilun Chen of Bloomberg News reported that Wal-Mart wants to build its China business:

Wal-Mart is tapping JD.com’s online resources after it struggled to adapt to a slowing local economy and more shoppers turn to online platforms including those owned by Alibaba. Wal-Mart Chief Executive Officer Doug McMillon has said that the company needs to succeed in China, where it estimates that 25 percent of global retail growth will come from in the next five years.

On Tuesday, JD.com’s shares gained the most intraday since Feb. 16, jumping as much as 12 percent. Its shares have dropped 13 percent this year.

“The stepped-up investment in JD has been part of our plan, as we continue to be a passive investor,” Jo Warner, a spokeswoman for Wal-Mart, said in an e-mail.

Following Amazon.com Inc.’s model, a significant share of JD.com business is generated from selling products it holds in its own inventory. Its logistics network has also helped win more users through speedy shipping. The company is competing with Alibaba in sectors of fast consumer goods and electronics and home appliances, as both seek growth in smaller cities and rural areas.