#123 From Wal-Mart to Wal-Smart?

The mere fact that Wal-Mart has 430 stores in China might make this look like a success story. However, the reality is that for the longest time, China has presented significant challenges to the world’s largest retailer. Since the opening of its first store in Shenzhen in 1996, Wal-Mart struggled to gain a foothold in the Chinese market. Not only had Wal-Mart not been able to find the right mix of products for the Chinese market in general, but it has also ignored the fundamental differences between regions and cities in China. In addition, Wal-Mart has also never been able to deal with an environment that doesn’t exactly support its hyper-efficient value chain. Now, however, it seems that Wal-Mart has been getting, well Wal-Smart. Last year, Wal-Mart sold its eCommerce website Yihaodian to JD.com, the second-largest online retailer in China (after Alibaba) while retaining the right to operate stores. The sale brought a nice windfall to Wal-Mart, which will also continue to provide logistics to the online retailer, including a 2-hour delivery service. JD.com acted swiftly and embarked on a promotion splurge that’s built around aggressive pricing.
Things seem to have been going so well since that Wal-Mart quickly decided to double its stake in JD.com. This is a remarkable shift from Wal-Mart’s earlier approaches to foreign markets which resulted in failures in Germany or South Korea. Instead of opting for wholly owned subsidiaries, Wal-Mart now seems to be happy with alliances. The stock market seems to validate that kind of thinking.

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