Wal-Mart Partners With Alibaba Unit To Offer Mobile Pay In China

Retail giant Wal-Mart Stores confirmed that it has partnered with Alibaba’s financial arm, Ant Financial, to offer mobile pay in China. It’s an interesting deal given the two parties are competitors on some levels.

“We launched Alipay Wallet in 25 Shenzhen stores, including Sam’s Club, with plans to expand to other stores in the future,” said Marilee McInnis, spokeswoman for Walmart International corporate affairs.

The primary reason Wal-Mart said it made the deal is because Alipay will help better serve customers. McInnis told The City Wire that allowing mobile payment in seconds, is increasingly what Walmart customers want because of the convenience and the ability to shop however, whenever and wherever they want.

This somewhat unlikely partnership on the surface makes sense on many levels, according to economic and retail experts.

Dr. Raja Kali, professor of economics at the University of Arkansas, said Chinese consumers are encouraged by their government to spend more money as China works to tilt more toward a consumer-driven economy and away from the export-driven model it has been for decades. He’s not surprised to see Walmart China reach out to Alibaba’s financial unit given that Alibaba is a trusted brand among the Chinese. Another interesting factor at work in China is the lack of credit and debit cards in use as the country is still a cash society.

“We know that the Chinese consumers are sophisticated users of mobile phones and a large adopter of smart phone technology. It’s logical for Wal-Mart to take this initiative in this area because it gives their customers one additional way to pay for their purchases,” Kali said.

He has no doubt that the lack of credit and debit card usage across China is driving mobile pay faster there than in the United States.

“Retailers offering mobile pay in China are creating a leapfrog effect over credit and debit cards,” Kali said. “The fact Wal-Mart is testing this first in Shenzen, where they are headquartered is the equivalent of them testing something in Bentonville like they often do.”

Alipay spokeswoman Miranda Shek told China Daily that the Walmart China partnership is a significant move as the mobile pay service is gaining popularity. Alipay reported it has more than 800 million registered users and 190 million active users for its mobile pay system. The company also claims to process 45 million transactions daily because the payment option is already accepted at 40,000 locations, including at Wal-Mart competitors Carrefour and government-owned grocers.

Retail expert Carol Spieckerman, CEO of newmarketbuilders, frequently lauds Wal-Mart’s efforts to test the waters, stretch its boundaries and look for solutions that best service its 220 million global customers each week. Spieckerman has characterized mobile pay here in the U.S. like days in the Wild West with various payment platforms jockeying for position amid skittish consumer sentiment from recent data breaches.

Mobile pay in China is further along which gives Wal-Mart an opportunity to use
its global presence to test the payment form before it become more mainstream in the U.S.

China is an important market for Walmart International and Walmart.com which controls an Alibaba competitor — Yihoadian. Kali said the benefits of working with Alibaba’s financial mobile pay option are important for Wal-Mart who does compete with Alibaba in some areas.

“Think of if this way: Wal-Mart also competes with Google and Apple in some areas, but they also offer those products because it’s important to do so,” Kali said.

After pulling back on expansion within China in recent years, Wal-Mart Stores CEO Doug McMillon announced April 29 plans to open 115 new stores inside China by 2017. This expansion will expand the retail giant’s footprint by nearly one-third.

“Our aim is to become an integral part of China’s economy,” McMillon said in Beijing last month. “China is a top priority.”

Shanghai, Shenzhen and Wuhan are three cities tagged for new store openings over the next two years. This expansion will create more than 30,000 jobs The retailer also said it will invest $60 million remodeling more than 50 other stores in China this year.

Doing business in China has not been easy for Walmart in what is a highly competitive environment. Walmart International CEO David Cheesewright said in February net sales in China declined 0.7% and comp sales were down 2.3% for the fourth quarter ending Jan. 31.

In its recent annual report, Wal-Mart said it operated 411 stores in China as of Jan. 31.