China Supermarket Sector:JD and Walmart alliance may bring more competition to online grocery retail
JD and WMT announced a strategic alliance. JD will take ownership of Yihaodian marketplace platform assets from WMT by issuing 144 mn new Class A ordinary shares to WMT. The two company will also have a supply chain cooperation, and WMT will open "Sam's Club" store on JD.com
We expect more competition in online grocery retail space. This will have negative impact on other online grocery retailers e.g. Womai.com of COFCO, Feiniu.com of Sun Art. It is more difficult for offline players to develop e-commerce business by themselves. More cooperation between online and offline is likely in the future.
Online grocery retail takes <5% of the overall grocery sales. The alliance between JD and WMT will not have significant impact on offline competition.
The grocery retail market is still very fragmented, and top ten players have ~12% combined market share. Consolidation is still the key trend in grocery retail space. We still prefer top players with strong supply chain management, like Yonghui and Sun Art, to consolidate the market.