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Text｜Li Yanyan, reporter of "Chinese Entrepreneurs"

Editor: Yao Yun

Photo by Deng Pan

After 8 years of "long run",Walmart"Clearance"JD.com。

After the U.S. stock market closed on August 21, Beijing time, WalmartSecurities and Exchange Commission(SEC) disclosed that it had sold all of its JD.com shares.

"This decision allows us to better focus on strong growth in China, including the operations of Walmart supercenters and Sam's Club, and allocate assets to other priorities," a Walmart official responded to China Entrepreneur.

According to relevant documents, the transaction involves shares with a maximum value of approximately US$3.74 billion. Investors close to the transaction analyzed thatThis transaction may be a necessity for Walmart to ease its own financial pressure.According to people close to JD.com,This change in equity investment will not affect the cooperation between the two parties at any business level, and both parties are willing to continue to maintain close business cooperation.

In 2016, global retail giant Walmart made a strategic investment in JD.com, holding nearly 10% of the latter's shares. In 2018, the two parties jointly invested in Dada. Although its voting rights are relatively low, this shareholding still reflects the in-depth cooperation between the two parties in the field of retail e-commerce.Prior to this share reduction, Walmart was JD.com's largest external shareholder besides the company's founder Liu Qiangdong.

Although both parties stated that the subsequent business cooperation relationship will remain unchanged, it still aroused a lot of speculation. Especially since Tencent bid farewell to its position as JD.com's largest shareholder after eight years in 2021, Walmart's withdrawal this time seems to be unable to escape the "seven-year itch". What is Walmart's consideration behind the "breakup"? What impact will this "clearance-style" reduction have on both parties?

"Breakup" under pressure?

In June 2016, Walmart made its first strategic investment in JD.com.

At the time, Walmart sold its online grocery store Yihaodian in China in exchange for a 5% stake in JD.com, a deal that was valued at $1.5 billion at the time.It is worth noting that the cooperation between JD.com and Walmart is not a purely financial investment.

The two parties have announced that they willSupply ChainJD.com has carried out all-round cooperation in the fields of talent, technology and logistics, including JD.com's ownership of No.1 store's brand, website and APP; Sam's Club has opened an official flagship store on the JD.com platform; Sam's Club uses JD.com's integrated warehousing and distribution logistics services; Walmart's physical stores are connected to JD.com's invested crowdsourcing logistics platform Dada and O2O e-commerce platform JD.com Home Delivery, etc.

For JD.com at that time, this transaction could make up for the difference in categories other than its main electronic products. After the news was released, JD.com's stock price rose. In October of the same year, Walmart increased its stake in JD.com to 10.8%. Walmart increased its stake again. As of December 31, 2016, Walmart held a total of 12.1% of JD.com's Class A common stock. Then in 2018, the two parties jointly invested in Dada, of which Walmart invested US$319 million.

According to JD.com's 2023 annual report, as of March 31 this year, JD.com founder Liu Qiangdong held a total of 11.2% of JD.com's equity and 70.5% of voting rights; Walmart held 289 million Class A common shares, accounting for 9.4%, and 3.1% of voting rights, making it JD.com's second largest shareholder. In the past year, Liu Qiangdong's equity control over JD.com has dropped by 1.5 percentage points, and his voting rights have dropped by 3.4 percentage points.

From continuous increase in holdings to a sudden reduction in holdings, the ups and downs took only 8 years. A person close to JD.com commented,The eight-year cooperation between the two parties "is a model of mutually beneficial cooperation" and has achieved remarkable results in their respective established strategic goals. "Walmart has completed its e-commerce layout in China, and JD.com has also expanded its global supply chain capabilities."

The aforementioned person close to JD.com also said that the change in equity investment will not affect any business cooperation between the two parties, and both parties are willing to continue to maintain a close business cooperation relationship and expand domestic and foreign market business. Walmart said that JD.com has been its valuable partner for the past eight years, and the two parties will continue to maintain business cooperation in the future.

According to analysis by investors close to the transaction,It is possible that this "breakup" is a need for Walmart to ease its own financial pressure."Due to the slowdown in Walmart's revenue growth and reduction in cash flow in the second quarter, and the need to cope with changes in the current market environment, Walmart made a diversification strategy adjustment. In order to release resources and optimize capital allocation, withdrawing from JD.com's equity investment is also a normal capital operation behavior."

Compared with its overall performance, Walmart's profits declined in the second fiscal quarter.

In fiscal year 2024, Walmart's total revenue was US$648.125 billion, a year-on-year increase of 6%; net sales were US$642.637 billion, a year-on-year increase of 6.1%;Net ProfitWalmart's second quarter financial report for fiscal year 2025 showed that Walmart's total revenue reached US$169.335 billion, a year-on-year increase of 4.8%; its net profit attributable to shareholders was US$4.501 billion, a year-on-year decrease of 43%.

Li Chengdong, a senior e-commerce industry observer and founder of Dolphin Think Tank, believes thatCompared with financial needs, this transaction has a lot to do with Walmart's strategic considerations."Although Walmart's expansion in China is relatively slow, it is still profitable overall," Li Chengdong told China Entrepreneur. For JD.com, the impact is mainly on the capital level.

Affected by the relevant news, JD.com's US stock closed down 4.57% on Tuesday at $28.19, and fell about 10% in after-hours trading. During the same period, Walmart's stock price rose 1.11% to close at $74.54 per share, with a total market value of $599.57 billion.

Each has its own gains and losses

Based on the growth potential of the Chinese market, Walmart China has been promoting the exploration of domestic incremental business in recent years, especially the expansion of Sam's Club. Sam's Club has become an important performance support for Walmart China, and e-commerce business is the growth focus of Sam's Club.

According to media statistics, Sam's Club currently has 46 stores in China. Sam's Club China's online sales increased by 29% year-on-year in the first half of 2024, accounting for about 50% of total sales. Walmart International President and CEO McLay also said earlier,Walmart is full of confidence in the development of the Chinese economy and the Chinese market, and will continue to expand its operations in China and actively develop its omni-channel retail business.

Walmart's e-commerce performance in the Chinese market is outstanding. The recently released second quarter financial report shows that Walmart China's net sales in the second quarter were US$4.6 billion. Compared with the global revenue growth rate of 4.8%, it still maintained a double-digit growth rate of 17.7%, of which the net sales growth rate from e-commerce business reached 23%, and the penetration rate of e-commerce reached 49%, an increase of 200 basis points from the second quarter of last year.

Due to the needs of e-commerce business, Walmart China was once deeply tied to JD.com.Behind the "breakup", Walmart's investment layout in the Chinese market is still extending.

For JD.com, which is in urgent need of growth, the strong rivals around it add to its anxiety. Liu Qiangdong returned at the end of 2022, and JD.com turned to a low-price strategy and made several changes to its executives and organizations. However, over the past year or so, JD.com's "low-price strategy" has been accompanied by doubts.

The e-commerce war has reached such a stalemate that JD.com has lost another strategic ally after Tencent. Some industry insiders speculate that this may inevitably lead to pessimistic market expectations.

On December 23, 2021, Tencent distributed approximately 460 million JD.com shares it holds to Tencent shareholders. After this dividend payment, Tencent's shareholding in JD.com will drop from 16.9% to 2.3%, and it will no longer be JD.com's largest shareholder. At the same time, Tencent President Martin Lau will also resign as a director of JD.com.

Tencent and JD.com started their relationship in 2014.Mobile InternetThe wave rises,AlibabaIts Taobao e-commerce business is constantly expanding, JD.com is eager to break through the PC limitation and move towards the mobile Internet, while Tencent is also trying to enter the e-commerce field to improve the ecological chain from social networking to e-commerce. With the social traffic advantage held by Tencent, JD.com got an early ticket to the mobile Internet and continued to grow.

Even if Tencent completely lets go of its e-commerce business, its cooperation with JD.com may not be able to escape the "seven-year itch".PinduoduoThe company completed a $110 million Series B financing round, led by Tencent. Since then, Tencent has continued to follow up with investments. In 2018, before Pinduoduo went public, Tencent and Sequoia China invested $1.369 billion in Pinduoduo. Compared with JD.com, Tencent's investment in Pinduoduo is greater and more detailed.

As of August 20, JD.com’s total market value of U.S. stocks was US$44.9 billion, while its “old rival” Pinduoduo’s total market value has exceeded US$200 billion, which is more than four times the size of JD.com.Nowadays, e-commerce has reached a crossroads in the increasingly fierce "price war". Taotian Group chose to adjust its low-price strategy after 618. According to the statement of JD.com executives in the performance meeting, JD.com's low-price strategy has not changed.

Not long ago, on August 15, JD.com handed in its second quarter report. The financial report shows that during the period, JD.com's total revenue was 291.4 billion yuan. Net profit attributable to ordinary shareholders was 12.6 billion yuan, a year-on-year increase of 90.91%; adjusted net profit was 14.5 billion yuan, a year-on-year increase of 69%, and the net profit margin reached 5.0% for the first time.BOCOM InternationalThe report said that JD.com's revenue growth was basically in line with market expectations, and its profit growth exceeded expectations.

but,Morgan StanleyInvestment institutions such as JD.com and JD Retail also reminded investors that JD.com's revenue growth is facing certain pressures amid weak consumption and increasingly fierce e-commerce competition. In the first half of the year, JD.com and JD Retail's revenue increased by 3.9% year-on-year, slightly higher than the growth rate of China's total retail sales of consumer goods, but revenue growth is not expected to recover significantly in the second half of the year.

Compared with domestic e-commerce platform companies, JD.com has its own uniqueness. Liu Qiangdong has paid special attention to three things since the beginning of his business: technology, logistics and customer service. He once got his hands dirty, wrote code for websites, delivered couriers, and worked in customer service for 4 years. This is also a microcosm of JD.com's early days. Most of the problems had to be solved by manpower, spirit and additional equipment. In fact, it is a footnote to JD.com's establishment over the years, and it may be its best weapon to face new challenges and solve new problems in the future.

There is no shortage of "latecomers" in China's e-commerce world. As Xu Ran, CEO of JD.com Group, said recently, China's e-commerce industry is large and full of vitality, and has been attracting different types of platforms or players. Each participant has formed their own characteristics and moats based on different models. The essence of e-commerce still needs to return to how to better improve user experience and how to achieve win-win results with partners.