Online shopping is here to stay — and the rise of new, disruptive technologies will smooth out every step of the retail supply chain. Production, distribution and logistics are more efficient, marketing is more targeted, payment is safer, delivery is faster, product quality improves — and big markets like China and India offer the hope of exponential growth.
For traditional retailers, this creates a dilemma — the opportunities are huge, but nimble, smart start-ups have often got there first and carved out a huge chunk of the market.
One way to deal with the dilemma is to seal deals with start-ups themselves ... with a deal announced yesterday by US giant Walmart and China's second largest e-commerce retailer, JD.com, being a case in point.
Walmart, the world’s largest retailer by revenue, announced on Thursday it had invested $320 million of fresh capital into Dada-JD Daojia, a JD.com-backed Chinese startup. JD.com has contributed the remaining $180 million, according to a statement sent to FinanceAsia.
Dada is a retail logistics firm that delivers goods provides local one-hour delivery services to customers of approximately 200 Walmart stores across 30 major cities in China, as well as for JD.com.
The firm was founded in a 2016 merger between logistics operator Dada and JD's own online-to-offline instant delivery subsidiary JD Daojia. Six months later, in October 2016, Walmart came onboard with an initial $50 million investment.
The latest funding round gives Walmart a 10% stake and a seat on the board. Walmart said in the statement it saw Dada's business model as having "great potential" in China.
Walmart, which has been in China since 1996, is not hiding its ambition in the country's broad online-to-offline retail market. This dog-eat-dog sector is pitting home-grown traditional retailers such as China Resources, emerging online players like Alibaba and international invaders like Carrefour against each other.
“With the investment, we will significantly improve our omnichannel service in China,” said Chen Wenyuan, CEO of Walmart’s China arm. The company is intensifying innovation in multiple dimensions to attract Chinese consumers with simpler and more convenient shopping experience, he added.
ASIAN BATTLE, GLOBAL IMPLICATIONS?
The move marks the US retailer’s third significant team-up with an Asian internet firm in just the past three months.
For Walmart, this all forms part of a wider strategic shift as it seeks to find its footing in a global retail landscape that is being upended by technological change — with China's Alibaba and its US peer Amazon at the forefront.
On Wednesday, Indian regulators approved Walmart’s $16 billion acquisition of Flipkart, an Indian e-commerce startup.
The deal, proposed in May, was considered a warning shot against both Amazon, which has designs on the Indian e-commerce market, and Alibaba over the latter’s e-payment dominance in its homeland and its growth beyond the territory.
To make its pitch for a bigger slice of China’s e-commerce field, Walmart announced in early June that it had entered into a formal deep strategic partnership with Tencent, highlighting mutual interests in several key sectors including e-payment.
As early as June 2016, Walmart held out its olive branch to JD.com, when Dada-JD Daojia and Walmart formed a strategic partnership, under which Dada provided delivery services to all of Walmart China’s stores.
Tencent and JD have tight bonds; the former became the largest shareholder of the latter in 2016, while the latter acquired a 100% interest in the former’s online shopping subsidiaries, Paipai and QQ Wanggou, in 2014.
With an all-star alliance including China’s largest social network sites and the second largest e-commerce platform, Walmart is determined to be a significant player in China and the region’s retail sector. With hyper-competitive rivals like Alibaba building alliances and developing innovations of their own, it promises to be a spectacular battle.
Barriers between online and offline shopping will fall and geographical restrictions will become less important, according to JD.com's chief strategy officer, Liao Jianwen.
As he put it: “The future of global retail is boundaryless.”