Thursday, August 16, 2012

Wal-Mart Stores, Inc. (NYSE:WMT) All Set To Hit E-commerce Retail Segment in China

Wal-Mart Stores, Inc.(NYSE:WMT) on Wednesday announced that it had got the Chinese government's nod to take a majority stake the country's leading online e-commerce portal, Yihaodian.

This piece of news has come as nasty piece of jolt to the Chinese retail sector, where retailers are struggling with the slowdown and get their goods moving off the shop shelves.

Wal-Mart had submitted the details of the deal to the Chinese government in December last year and has been awaiting approval ever since.

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Chinese consumers might not be thronging the brick and mortar malls and shops but they are not averse to shopping online.

According to the official Xinhua news agency, 210 million Chinese are shopping online. The value of online shopping transactions in China jumped 51.6 percent year on year, to 268.4 billion Yuan, in the second quarter of 2012, Xinhua reported, citing iResearch, a market research firm with offices in China and Silicon Valley.

E-commerce is a fairly recently phenomenon in China, where it was slow to take off. As recent as in 2008 e-commerce accounted for only 2 percent of total retail sales in the country, with very few Chinese possessing credit cards. But then suddenly there has been a virtual explosion in this segment with growth of payment services such as Alibaba Group's AliPay, which is driving the segment.

This year, online’s share of total sales will be between 6 percent and 7 percent, Michael Clendenin, RedTech’s managing director told Bloomberg. That puts China at the same level as the U.S. “It will more than likely surpass the U.S. in the next two years,” he added.

Online retailers have slashed their delivery charges and there is very little incentive for Chinese shoppers to go to the malls which are anyway crowded. The Chinese are discovering the luxury and convenience of sitting at home and ordering things that catch their fancy. 

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