Executive Summary

• On June 20, Walmart (WMT) and JD.com (JD) announced a strategic partnership in China under which JD.com will acquire Walmart’s online grocery site Yihaodian, and Walmart and its Sam’s Club stores will become listed retailers on JD.com’s e-commerce sites. The deal leverages JD.com’s online traffic and broad logistics network and Walmart’s global supply chain.
• Under the agreement, Walmart will take a stake of about 5%, valued at approximately $1.5 billion, in JD.com.
• This long-term partnership will allow JD.com to expand its online-to-offline commerce operations, particularly in grocery. Walmart will be able to drive more traffic to its Sam’s Club and Walmart businesses through JD.com’s sites.
• Although Yihaodian currently accounts for only 1.5% of China’s B2C e-commerce market, it has a niche in China’s online grocery business, as other e-commerce players, such as Alibaba and JD.com, have much broader category coverage.
• com has made a series of investments in grocers, including Chinese online produce retailer FruitDay and supermarket chain Yonghui. Through this latest Walmart partnership, JD.com will be able to expand its imported food offerings and benefit from the use of Walmart’s and Sam’s Club’s supply chain.
• Walmart estimated that the deal will increase its second-quarter EPS by $0.16–$0.19 (its current guidance calls for EPS of $0.95–$1.08). The company is giving up all rights to create new e-commerce websites in China, but will continue to operate existing Walmart and Sam’s Club apps and websites.