Wal-Mart (NYSE:WMT) recently purchased stake in Yihaodian in order to expand the scope of its online sales business in the region. Though the e-commerce market in China is still in its early stages, Wal-Mart and others see tremendous growth, which gives the Arkansas based retailer confidence in securing a foothold in the market. It competes with big-name retailers like Target (NYSE:TGT), Costco (NASDAQ:COST), Amazon (NASDAQ:AMZN) and Best Buy (NYSE:BBY) though the incumbent Alibaba Group currently dominates e-commerce in China.
Our price estimate for Wal-Mart stands at $74.46 implies just about 40% upside to the market price.
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Wal-Mart building presence in Chinese e-commerce market
Wal-Mart has plans of establishing a strong presence in China’s e-commerce market. It recently bought a stake in Yihaodian, a fast-growing online retailer of groceries, consumer electronics and apparels. Yihaodian operates next-day delivery service for essential daily goods at competitive prices. It has 2,000 employees and over 75,000 Stock Keeping Units (SKUs) with its logistics network bases located in Beijing, Shanghai and Guangzhou.
In December 2010, it acquired online Chinese retailer 360buy.com. It sells mainly consumer electronics and has 15 million users and distribution facilities in almost 60 cities.
E-commerce is growing fast in China. It has about 420 million internet users, the largest number worldwide, according to a government survey. According to iResearch, a Shanghai-based firm that tracks web developments, online commerce reached just over $38 billion in 2009, up nearly 94% from 2008. The research firm predicts that China’s online shopping market will exceed $154 billion in 2013. . At present, Taobao.com, a subsidiary of the internet giant Alibaba, dominates China’s online marketplace.
Wal-Mart has over 300 stores in China and is looking to expand its footprint in the country.Notes: