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According to the latest documents Walmart submitted to regulators, Walmart has completed the sale of all its shares in JD.com, with a total value of approximately US$3.7 billion. Before the reduction, Walmart held a 9.4% stake in JD.com, making it the second largest shareholder after Liu Qiangdong.After the transaction information was disclosed, JD.com’s Hong Kong and US stocks both fell by around 10%.

JD.com then quickly announced a $390 million repurchase plan, but its effect on boosting confidence in the capital market was limited.The reason is that JD.com's business base is under pressure amid fierce e-commerce competition. From a strategic perspective, while competitors such as Taobao and Douyin e-commerce have successively adjusted their low-price strategies to achieve steady growth, JD.com continues to implement a low-price strategy, which has also caused the industry to question its continued profitability.

According to JD.com's latest second-quarter financial report, JD.com's revenue grew by only 1.2% year-on-year, far lower than the 11% quarterly growth rate of national online retail sales. This was mainly due to a 4.6% year-on-year decline in revenue from core electronic products and home appliances, which offset the 8.7% year-on-year growth in daily necessities, dragging down the overall performance.

JD.com CFO Shan Su explained in the earnings call that revenue growth slowed in the second quarter due to short-term factors such as the high base of summer products such as air conditioners.The increase in profit margin is mainly due to the improvement in supply chain efficiency, which has led to a significant improvement in gross profit margin year-on-year. The simple summary is four words: cost reduction and efficiency improvement. This also explains why JD.com can achieve a record high net profit of 12.6 billion yuan even though its revenue growth rate has hit a record low.

"Sale" on JD.com

Objectively speaking, JD.com did not underperform the market. Consumption was weak in the second quarter of this year, and the price war among major e-commerce platforms has made it difficult to achieve explosive growth. Regarding this financial report, Morgan Stanley's report believes that JD.com's revenue growth rate is only 1.2% year-on-year, which should attract market attention. The report predicts that JD.com's revenue growth will not recover significantly in the second half of the year.

Looking back at the whole of 2023, JD.com's quarterly revenue growth rates were 1.4%, 7.6%, 1.7% and 3.6% respectively.It is hard to say that Walmart’s decision to “clear inventory” was not affected by JD.com’s growth difficulties.However, according to investment analysts, this transaction may be a capital allocation made by Walmart to alleviate its own financial pressure and does not involve a strategic partnership with JD.com.

This statement was officially confirmed by Walmart and JD.com. A person close to JD.com also revealed to the media that the two sides have achieved remarkable results in the eight years of cooperation, which can be regarded as a model of mutually beneficial cooperation: Walmart has completed its domestic e-commerce layout, and JD.com has also expanded its global supply chain capabilities.

This actually reveals another fact about Walmart's "sale" of JD.com:Walmart's reliance on JD.com has been decreasing. Moreover, Walmart is proving through Sam's Club that its business objectives in the Chinese market no longer need to be achieved by holding shares in JD.com.

Looking back at the cooperation between Walmart and JD.com, it can be regarded as a microcosm of the development history of China's retail industry in the past three decades.As the world's largest retailer, Walmart entered the Chinese market in 1996 and opened its first Walmart shopping mall and Sam's Club in Shenzhen that year. At that time, the head of Walmart China said that the focus of Walmart's future development would be on the integration of online and offline development.

This laid the groundwork for the subsequent relationship between Walmart and JD.com. At the end of 2010, JD.com announced that Walmart and six other companies agreed to invest $500 million in JD.com, and said that Walmart mainly appeared in the role of a "strategic investor." However, during the C round of financing of JD.com the following year, Walmart tried to acquire JD.com, but was rejected by Liu Qiangdong.The two sides have been "disunited in appearance" for nearly five years.

These are also the five years in which China's e-commerce has developed most rapidly, and its impact on physical retail has become increasingly apparent.In order to get familiar with the Chinese e-commerce market, Walmart shifted its focus from JD.com to Yihaodian. It first invested in Yihaodian in 2012 and acquired full control of it in 2015. However, Walmart's management of Yihaodian has always been in a loss-making state. According to statistics, in 2013, Yihaodian's market sales amounted to 11.54 billion yuan.In June 2015, Yihaodian’s market share among e-commerce websites was only 1.5%.

The new retail trend started in 2014. That year, Alibaba decided to invest in Intime Department Store. At that time, Jack Ma believed that the era of pure e-commerce would soon end and the era of new retail had arrived.

In the following four years, Alibaba's investment in offline retail reached 75 billion yuan, and through capital operations such as holding and mergers and acquisitions, it has deeply deployed offline retail fields such as fresh food, department stores, and supermarkets. Tencent, JD.com, Suning and other giants are also taking action. For example, JD.com has invested in Yonghui Supermarket and BBK, and opened 7fresh and JD.com stores.

Among them, the most critical node was in 2016, when Jack Ma first proposed the "Five New" strategy at the Yunqi Conference, namely new retail, new finance, new manufacturing, new technology, and new energy, with new retail being the top priority.He believes that in the next 30 years, the development of the "Five New" will profoundly affect the future of China, the world and everyone. His ultimate goal is only one: to go offline and create another Alibaba.

It was also in March of that year that Alibaba announced that it had surpassed Walmart to become the world's largest retailer, with annual transaction volume reaching 3 trillion yuan.

Sam is confident

This trend has influenced all e-commerce and retail practitioners, who have proposed and implemented similar concepts, such as Suning's "smart retail" and Liu Qiangdong's proposal of the fourth retail revolution and the concept of "boundaryless retail".

It is worth mentioning that in April 2015, Liu Qiangdong wrote in the preface of the book "The Richest Man in America: The Autobiography of Sam Walton, Founder of Walmart",“If you want to do retail, how can you not read Walmart?”At the end of the preface, Liu Qiangdong praised, "The secrets of the retail industry are all on Walmart's shelves."

Walmart and JD.com also saw the possibility of cooperation again and soon entered a "honeymoon period". In June 2016, JD.com and Walmart reached a series of in-depth strategic cooperation. According to the agreement, JD.com transferred 5% of its equity for US$1.5 billion in exchange for Walmart's strategic cooperation and most of Yihaodian's assets.

This is a replica of the way Tencent acquired a stake in JD.com. Tencent packaged its e-commerce assets such as Yixun and Paipai and gave them to JD.com, and opened a channel on WeChat to provide traffic support, thereby obtaining a 20% stake in JD.com.

At that time, the outside world commented that the cooperation between Walmart and JD.com would rewrite the history of China's retail industry. Some analysts also said that for JD.com, leveraging Walmart's resources can help it quickly go global; secondly, it can strengthen the supply chain and enhance the price advantage of goods; thirdly, the two sides can cooperate at the O2O supermarket level; fourthly, capital demands can strengthen cash capabilities.

In the early stages of the cooperation, both sides also demonstrated their sincerity and determination through practical actions.For example, in 2017, Walmart and JD.com reached the "three links" cooperation of inventory interconnection, user interconnection and store interconnection for the first time, and jointly held a large-scale promotion event "88 Shopping Festival"; in 2018, JD.com and Walmart fully upgraded the "three links strategy" of user, store and inventory interconnection, implemented the "three links 2.0 strategy" representing the integration of online and offline, and deepened supply chain cooperation.

During this period, Walmart also participated in the strategic financing of JD.com's businesses many times. For example, in 2018, Walmart increased its investment in "Dada-JD.com Home Delivery" by approximately US$320 million.

This "honeymoon period" saw little progress in the later stages, and Walmart was more inclined to classify its cooperation with JD.com as a "financial investment."On the one hand, the situation in China's retail market has changed dramatically, and the story of new retail is in danger of being "discontinued".For example, the founder of Hema retired and was caught up in rumors of being sold. Intime, Sun Art Retail, and Hema have all been reported to be sold. In a February earnings conference call, Joseph Tsai said that it was reasonable for Alibaba to withdraw from the traditional physical retail business, it was just a matter of time.

andJD.com and Meituan's new retail businesses are also adjusting. For example, JD.com 7fresh once stopped expanding and turned to increasing its investment in physical retail; Meituan's Xiaoxiang Supermarket offline stores were gradually closed, and it focused more on online instant delivery.

On the other hand, Walmart itself is adjusting its operating strategy in the Chinese market, gradually abandoning the hypermarket model and shifting its focus to the warehouse membership model of Sam's Club. Its cooperation with JD.com still involves direct competition in some aspects.According to incomplete statistics, in the past two and a half years, Walmart has closed nearly 60 hypermarket stores in the Chinese market and turned to opening new or renovating Sam's Club stores.

Data shows that Sam's Club currently has 48 stores in China, with total revenue exceeding 80 billion yuan last year. Some people in the retail industry speculate that Sam's Club's compound sales growth rate in the past three years is no less than 30%, and sales will exceed 80 billion in 2023. The average annual contribution of a single user is 14,000 yuan, which is 1.6 times that of Taobao and nearly 5 times that of Pinduoduo. In the second quarter of 2018, Sam's Club's sales increased by double digits year-on-year, driving Walmart China's net sales to increase by 17.7% year-on-year to US$4.6 billion.

In this huge contrast, thanks to JD.com's capacity building in e-commerce and distribution, Sam's Club, backed by Walmart's strong global supply chain and product capabilities, has expanded rapidly in the Chinese market.Data shows that 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, while the penetration rate of Walmart China's entire e-commerce has reached 48%.

Obviously, Sam's Club has become Walmart's core capability to win in the Chinese market, but JD.com's position is no longer that important. In other words, Sam's Club is also Walmart's biggest confidence in selling JD.com.For example, some people pointed out that after no longer holding JD.com shares, Walmart can focus more on expanding its stores in China. And Walmart is convinced that its Chinese business is strong enough to compete independently in the fiercely competitive retail market.

JD.com is still increasing its offline physical retail layout, which will face more intense competition from Walmart and Sam's Club. How to deal with the pressure from Sam's Club will also be a problem that other platforms with retail businesses need to face.