Wal-Mart doubling e-commerce warehouses, stake in JD.com

Dive Brief:

Wal-Mart Stores Inc. is moving assertively to boost its e-commerce sales by doubling the number of its web-oriented warehouses to 10 by the end of this year (even more than the eight analysts had expected by the end of 2017) and installing automated product sorting and item tracking technologies to rival Amazon’s operations, Reuters reports.
Wal-Mart is also moving to boost its e-commerce presence in China, almost doubling its stake in e-commerce marketplace JD.com, according to The Wall Street Journal.
In June Wal-Mart sold its Chinese e-commerce platform Yihaodian to JD, China's second-largest online retailer behind Alibaba.

Dive Insight:

On Thursday, Walmart will live stream its annual investor day meeting, where it is expected to give an update on its e-commerce business. The retail giant is shaking up its e-commerce efforts for good reason: It has faltered badly online.

Wal-Mart grew its e-commerce sales just 0.4% in its most recent quarter, with online sales representing just 3.1% of its total revenue, according to eMarketer data supplied to Retail Dive. By comparison, Amazon generated $21.12 billion in e-commerce sales last quarter, up 2.6% over the previous period.

Wal-Mart has been investing massively to correct that, spending some $3.8 billion in its fiscal 2016 year to boost sales online and in stores, according its annual report. That was before its $3.3 billion splurge to acquire e-commerce upstart Jet, which launched just last year and, despite some promising inroads into the space, hasn’t turned a profit.

Some experts are not so sure that Wal-Mart should wander so far from its brick-and-mortar stronghold. “Wal-Mart is the biggest retailer in the world, and their system is selling through bricks and mortar,” Nick Egelanian, president of retail development consultants SiteWorks International, told Retail Dive earlier this year. “We know that Wal-Mart has the most efficient system in the world. We know that they break that product down and put it on the shelves, and they do that very efficiently also, and then they’re done. And selling on the Internet is not efficient. The whole methodology of selling on the Internet is completely foreign to what it’s like selling at a Wal-Mart.”

The Jet acquisition hasn’t changed Egelanian’s mind. But investors seem more receptive to Wal-Mart's move to boost its JD stake. Its decision to unload Yihaodian was perceived by many as throwing in the towel in the Chinese e-commerce space, which is more established than in the U.S. But the deal contains incentives to deepen the partnership between Wal-Mart and JD, including a provision allowing Wal-Mart to increase its stake to 10% and gain observer status at JD board meetings.

Moody’s Investment Service hailed the move. “We view the doubling down of Walmart's stake in JD.com as a positive on a variety of fronts, particularly from a knowledge perspective as, similar to the benefits provided by Jet.com, there is much to learn from more developed online retailers,” Moody's lead retail analyst Charlie O’Shea said in a statement emailed Thursday to Retail Dive.