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Curb on Wal-Mart’s Yihaodian Deal Removed by Chinese Commerce Ministry


06/08/2016


Curb on Wal-Mart’s Yihaodian Deal Removed by Chinese Commerce Ministry
Concluding that the raising of the stakes of Wal-Mart in Chinese online supermarket Yihaodian would not impact the already competitive market, the Ministry of Commerce in China removed restrictions on Wal-Mart Stores Inc's deal in 2012 to raise its stake in online supermarket Yihaodian.
 
The ministry said in a statement that the government policies have facilitated the entry of new competitors into the China's value-added telecommunication services as the entry barriers for the industry have been eased since 2014.
 
"Under the restrictions, competitive edge of Yihaodian has been diminishing while its sales growth has been slowing," the ministry said.
 
However the ministry also added that the pace of development of Yihaodian has been slwow and it has lagged behind that of its main competitors.
 
Wal-Mart officials were not immediately available for comment.
 
With a 51 percent stake by buying into its parent, the world's largest retailer became the controlling shareholder in Yihaodian after it received "restricted" approval to raise its stake in the Chinese company in August 2012.
 
The deal had received conditional approval by the ministry's Anti-Monopoly Bureau, Wal-Mart said in 2012.
 
According to the restriction as imposed by the Chinese ministry, while Yihaodian’s parent company was not allowed to host third-party transactions on the platform, Yihaodian was asked to use its own e-commerce platform for sales.
 
Wal-Mart’s strategy in the Chinese market was solidified after US retailer bought out the remaining 49 percent stake in Yihaodian to accelerate its online push and to tae full ownership of the company in July of 2015. Just sometime before the buyout, China has announced that it would allow full foreign ownership of e-commerce businesses.
 
“With full ownership of Yihaodian, Walmart plans to invest in both accelerating e-commerce and creating a seamless experience for customers across online, mobile and stores,” the company had said in a statement in July of 2015 while taking over full ownership.
 
Ping An of China, a financial services group, and the co-founders of Yihaodian, former Chairman Yu Gang and former CEO Lui Junling had the rest of the shares of the company which were acquired by Wal-Mart. A a aprt of its strategy in China, Wal-Mart had made Lu Wang, president and CEO of Walmart Global eCommerce in Asia, the leader at Yihaodian as part of his overall executive responsibilities.
 
However the terms of the deal were not disclosed by Wal-Mart. As competition from Amazon.com Inc. becomes more acute, Wal-Mart plans to invest between $1.2 billion and $1.5 billion in e-commerce efforts globally in the fiscal year of 2015-16, the company has already said.
 
The purchase of Yihoadian was a part of that investment plan and its expenses were included in that estimate, the company had said.
 
The approval from the Chinese ministry of Commerce would boost Wal-Mart’s attempts to improve its Chinese operations by according more focus on China’s online shopping boom and moving away from expanding its brick-and-mortar presence in the country. This is so because the store operations of the company in China have been lackluster.
 
(Source:www.reuters.com & www.wsj.com) 


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