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Wal-Mart Buying Into China's Booming E-Commerce Market


China and Wal-Mart... it's not quite the cozy, one-way relationship you might expect. There are many Wal-Mart stores in China, though they don't lure Chinese shoppers with cheap American-made products - as if there were any to sell. Nope, Wal-Mart just wants to sell, period, and by snapping up a minority stake in Yihaodian the retail colossus will end up selling a lot more both online and offshore.

Yihaodian is one of China's fastest growing online retailers, offering China's increasingly net-savvy Chinese consumers more than 75,000 different products from basic grocery items to pricey home electronics.

The deal between Wal-Mart and Yihaodian (expected to close within the next 60 days, though financial terms have not been disclosed) meets two important criteria for Wal-Mart: expanding the company's presence internationally, and in the online sales market sector.

It's no secret that Mike Duke, Wal-Mart's Chief Executive, has been pushing for moves to achieve these two goals. The company's domestic in-store sales at stores open for at least one year have been falling for several quarters, indicating some degree of U.S. market saturation.

“Online sales in China are growing rapidly and are projected to match U.S. online sales in the next few years,” said Eduardo Castro-Wright (left), vice chairman of Wal-Mart Stores and CEO of Walmart global e-commerce and global sourcing.

“By investing in Yihaodian, we're continuing to establish a presence in this important e-commerce market, and are moving forward on fulfilling our aspiration of being the leading global multichannel retailer.”

Yihaodian (“number one store” in Chinese) was launched in July of 2008 and employs more than 2,000 people. The company has established a logistics network with centers in Beijing, Shanghai and Guangzhou in southern China. According to figures provided by the company, Yihaodian recorded revenue for the 2010 fiscal year amounted to 805 million yuan ( about $123.8 million). Plainly, the company is no slouch when it comes to running a successful retail business.

How does Yihaodian feel about nuzzling up to the world's largest public corporation (in 2010) by revenue? “Wal-Mart brings its global vision into our business,” explained Yu Gang (left), Yihaodian's chairman and co-founder. “In addition,” continued Yu, “its supply chain excellence will help us gain a competitive edge in the e-commerce industry in China.” (via TechCrunch and Internet Retailer)