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economic observer network zhou yue/text on august 27, jd.com (jd.nasdaq/9618.hk) launched a large-scale repurchase plan, announcing that it would repurchase shares (including american depositary shares) worth no more than us$5 billion in the next three years. its hong kong stocks rose 1.7% and its us stocks rose 2.2%.

this move may be aimed at boosting market confidence. a few days ago, the cooperation between walmart (wmt.nyse) and jd.com came to an end after 8 years. walmart sold all its jd.com shares, causing jd.com's hong kong stock to fall by more than 10% during the intraday session.

before the reduction, walmart was the second largest shareholder of jd.com after liu qiangdong. the total value of walmart's reduction of jd.com shares was about us$3.7 billion, which was interpreted by the market as walmart's lack of money.

however, this is not the case. the breakup between walmart and jd.com is not an isolated case. according to incomplete statistics from economic observer, walmart has sold or closed more than seven third-party e-commerce platforms since 2020. including the clearance of jd.com, the total amount of the transaction is less than us$10 billion.

since 2020, walmart ceo doug mcmillon has repeatedly emphasized that future resources, personnel and finances will be focused on walmart's own brands.

in a statement after clearing out its jd.com holdings, walmart said it would focus on its own-brand sam's club and other chinese businesses.

the only thing walmart treats differently is india, where it wants to build an upgraded version of alibaba.

to date, walmart’s investment in indian e-commerce company flipkart has reached nearly us$20 billion, far exceeding the total amount of investment walmart has made in acquiring or holding shares in third-party e-commerce companies in china, the united states and other places.

while walmart is selling off its e-commerce platforms in the united states and china, it is increasing its stake in flipkart. as of january this year, walmart's stake in flipkart has reached 85%, making it its largest shareholder. technology giants such as google, microsoft, and tencent all hold shares in the company.

flipkart was similar to alibaba in its early days, with two subsidiaries, the e-commerce platform flipkart and the mobile payment platform phonepe. they were regarded as the taobao group and ant group of india. phonepe was split in 2022. currently, flipkart and phonepe are valued at $35 billion and $12 billion, respectively. this means that the total valuation of walmart's investment in indian e-commerce companies exceeds jd.com's current market value of $42 billion.

it can be seen that walmart’s intention is very clear: sell off third-party e-commerce assets, develop its own brand e-commerce, and invest heavily in india. looking back, every move of walmart’s e-commerce can be seen as the chinese experience it learned from its “e-commerce teacher” jd.com.

the e-commerce journey of established retailers

walmart was founded in 1962 and initially gained popularity with its image as a grocery supermarket targeting the "downstream market".

since 2016, walmart has suddenly changed its direction and frantically acquired or invested in more than 10 third-party e-commerce platforms. these acquisitions have enabled walmart to increase third-party sellers, product categories, and establish an e-commerce team.

by 2018, walmart's e-commerce had 20,000 third-party sellers in the united states, nearly 20 times more than in 2015, and 67 million product categories, five times more than in 2015, especially high-profit categories such as clothing, shoes and bags. the team also recruited marc lore, the founder of the e-commerce website jet, who is seen as a key figure in the fight against amazon.

walmart's transformation comes from the strong rise of amazon. back in july 2015, amazon (amzn.nasdaq) turned losses into profits, its stock price hit a record high, and its market value exceeded walmart for the first time, becoming the world's most valuable retailer.

amazon has extended its tentacles into offline retail, acquiring a number of food stores with the intention of entering the grocery retail sector, where walmart is the strongest.

walmart had been lukewarmly promoting its e-commerce business for five years, but there were only 1,000 third-party sellers, so it finally panicked.

this offline retail king, which is over 50 years old, began to realize that e-commerce will subvert the retail industry and everything else, and had to accelerate its rush into the world of the internet.

in 2016, walmart first sold its loss-making no.1 store in china in exchange for a 5% stake in jd.com, a deal valued at about $1.5 billion. since then, walmart has cooperated with jd.com in logistics, warehousing, supply chain, and branding, learning how chinese e-commerce companies play.

at that time, the "cat and dog war" in china's e-commerce industry was escalating and was about to enter the "live streaming e-commerce" stage. the old-fashioned "shelf e-commerce" business model in the united states was already a thing of the past.

in the same year, walmart spent $3.3 billion to acquire the american e-commerce company jet. jet is known as "amazon's biggest competitor" and is most valued by the outside world for its recommendation algorithm similar to taobao's "thousands of faces for thousands of people".

from 2016 to 2018, walmart also bought many vertical e-commerce platforms in the united states, including women's clothing e-commerce modcloth, men's clothing e-commerce bonobos, plus-size women's clothing eloquii, outdoor equipment e-commerce moosejaw, footwear e-commerce shoebuy, etc. the transaction amounts of these acquisitions ranged from us$51 million to hundreds of millions of dollars, which did not exceed the transaction amounts of the acquisitions of jd.com and jet.

it can be said that the period from 2016 to the end of 2018 was the honeymoon period for walmart and many e-commerce platforms. for example, during this period its shareholding in jd.com once exceeded 10%.

however, problems soon emerged in the e-commerce companies that depended on walmart. these e-commerce brands made limited contributions to the growth of walmart's e-commerce business, and most of the e-commerce platforms failed to be self-sustaining.

this dragged down walmart's profitability. walmart's 2019 annual report showed that its net cash flow from investment activities reached us$24 billion, a year-on-year increase of 164%, but its net profit was only us$7.2 billion, a year-on-year decrease of 31%. this is the first time walmart's net profit has been less than us$10 billion since 2007.

walmart began to quickly clear out or close its e-commerce brands, and some were even sold at a discount. for example, bonobos, which walmart acquired for us$310 million, was sold for only us$75 million.

in 2020, jet, which once vowed to "subvert amazon", was still not profitable four years after its acquisition and was eventually closed, which marked walmart's determination to focus on its own brand e-commerce.

as the covid-19 pandemic swept the world, walmart took the initiative to launch an attack on amazon, using everything it had learned in china's e-commerce industry.

the king of retail reborn

walmart's increased investment in its own-brand e-commerce business in the united states has two advantages that helped it quickly defeat retail giants such as costco and rank second in the u.s. e-commerce rankings:

first, faster delivery speed and wider delivery range.

sam's club, a subsidiary of walmart, launched the "speedy delivery" service with the help of the one-hour same-city delivery system and "store + cloud warehouse" model established by jd.com in 2018, and surpassed hema in coverage and delivery speed in many cities.

since 2020, walmart has moved this system to the united states, mexico, canada and other countries, vigorously promoted the 2-hour express delivery service, built its own distribution team, and expanded the scale of door-to-door delivery services.

taking the united states as an example, the coverage of walmart’s two-hour delivery service has expanded from 6 million households to 30 million households, and the same-day delivery service can cover 80% of the us population.

walmart has transformed many offline stores into order fulfillment centers, such as jd.com's forward warehouses. walmart's more than 3,500 stores in the united states (about 75% of its total stores in the united states) can deliver online shopping orders, and no longer rely on the 31 distribution centers in the past for shipment and delivery.

after users search for products, walmart's system will locate the nearest store and deliver the goods in the shortest time and at the shortest distance, connecting orders for store pickup, delivery and in-store sales.

you should know that walmart has more than 5,000 stores in the united states, and almost 90% of americans live within 10 miles (about 16 kilometers) of a walmart. this is an advantage that no other retail company in the united states has.

during this year's second quarter earnings conference, walmart's chief financial officer repeatedly affirmed the attractiveness of walmart's superior "delivery capabilities" to customers.

not only americans like "fast delivery", but consumers in china, canada, india and other countries also enjoy it. walmart china's e-commerce orders increased to 59 million within one hour this quarter, an increase of 28%; canada's membership delivery service increased grocery sales orders by more than 40%, and the order frequency was higher than that of non-members.

the second is a stricter entry threshold that will allow more third-party sellers to make money.

a survey of us sellers found that 95% of walmart sellers were profitable, far exceeding amazon's 76%. the reasons include walmart's high threshold, low competition, low advertising costs and high profits.

but not all merchants are suitable for walmart, especially young brands with poor performance. walmart strictly reviews sellers and requires them to sell their own brands, and has requirements for their sales experience, sales volume, profit margin and other conditions.

walmart's chief u.s. e-commerce officer tom ward once explained that strict restrictions on third-party sellers can improve product quality and ultimately benefit consumers.

walmart's practices have attracted a lot of business. in the past six quarters, walmart's online sales have increased by more than 20% year-on-year in five quarters.

after its rebirth, walmart e-commerce has a greater ambition: not to be second, but to be first.

in most parts of the world, walmart's e-commerce market share lags behind amazon. for example, in the us market, amazon's share is close to 40%, and walmart ranks second with less than 10%.

the only exception is the indian market, where flipkart, an indian e-commerce company under walmart, has a market share of 48%, leading the indian market, while amazon india's market share is around 30%.

this made walmart proud, and it mentioned flipkart's name several times during the earnings conference.

investing in the next alibaba in india

flipkart's business model is very similar to that of jd.com, which mainly relies on self-operated shopping malls and large merchants. the products with the highest sales volume are digital electronics and clothing, which bring its average customer price to 3,000 rupees (about 260 yuan), which is 2 to 3 times that of other indian e-commerce companies.

as flipkart rapidly expanded in india, its valuation rose from $20 billion in 2018 to $35 billion to $40 billion this year.

however, back in 2018, when walmart announced the acquisition of flipkart for $16 billion, the market was not optimistic and its stock price fell by 4% that day. so far, this transaction is still the world's largest e-commerce acquisition.

investors thought the acquisition price was too high and expected flipkart to not be profitable in the next few years. even softbank, flipkart's largest shareholder at the time, chose to cash out $4 billion.

before walmart took a stake, flipkart's funds were almost exhausted. it competed with amazon and burned a lot of money in holiday promotions. although amazon also tried to acquire flipkart, it was restricted by india's antitrust policy and had to give up.

walmart not only solved flipkart's funding problems, but also brought china's offline and online retail experience: the two most important points are mobile payment and modern warehousing and logistics.

phonepe is india's largest mobile payment platform. its function is similar to alipay. it can not only make online and offline payments, but also purchase insurance and provide small loans. flipkart has also learned from alibaba's experience in spinning off ant group and will make phonepe independent in 2022 for its ipo.

flipkart also has its own "sf logistics" ekart, which is india's largest logistics and supply chain company. it is responsible for more than 90% of flipkart's e-commerce logistics services and can provide next-day delivery services in more than 200 cities.

with the support of walmart, flipkart has established more than 80 logistics centers, the largest of which covers an area of ​​2 million square feet, equivalent to 26 football fields. these centers use advanced technology to shorten transportation time by 35%-50%.

today, flipkart is no longer an e-commerce company. like alibaba, it has expanded its business to various industries. many of its platforms can be traced back to china. it is an indian internet giant that integrates ant group, xiyin, ctrip, and sf express.

flipkart currently has more than 600 million registered users, accounting for 43% of india’s population, a five-fold increase from 2018.

flipkart's revenue last year was 10.477 billion rupees (about 890 million yuan), and its loss was 4.419 billion rupees (about 375 million yuan), but its net loss narrowed by 9%. many institutions believe that it will turn losses into profits within the next two years.

there are two reasons why walmart is investing heavily in india:

one is that they are optimistic about the development prospects of e-commerce in india. due to the numerous policy restrictions in india, foreign retail giants cannot open retail supermarkets and can only engage in wholesale. the other two foreign retail giants, carrefour and metro, have withdrawn from india one after another due to the lack of profitability. only walmart persisted for decades and then sold nearly 30 of its offline wholesale stores to flipkart.

in india, e-commerce is developing rapidly, with the market size exceeding $100 billion last year. mckinsey predicts that by 2027, india's e-commerce market will grow at an average annual rate of 15% to $200 billion.

the second is to increase the purchase of "made in india" products and reduce excessive dependence on china's single supply chain, which is an important means for walmart to reduce global commodity costs.

although china remains walmart's largest import country, the proportion of "made in india" products purchased by walmart is increasing significantly.

in the first eight months of 2023, goods sourced from india accounted for 25% of walmart's total imports, compared with just 2% in 2018. at the same time, the proportion of walmart's imports from china fell to 60% from 80% in 2018. other multinational retailers, such as marks & spencer, decathlon, primark, gap and tesco, are also increasing their purchases of indian goods.

earlier this year, walmart announced a procurement target in india, the first time it has set such a target outside the united states, and expects to import $10 billion worth of goods from india each year by 2027. a comparable figure is that walmart has purchased a total of $30 billion worth of goods in india over the past 20 years. the new procurement target is surprisingly large, which reflects the importance walmart attaches to the indian market.