Walmart may have cracked the code on how to grow global market share against Amazon and Alibaba when in 2016 it sold its online business Yihoadian in China to JD.com and continued to invest in JD.com through 2017.
Last week Walmart entered into a new partnership with Rakuten, the top e-commerce platform in Japan, to launch a new online grocery delivery service there later this year. The deal also gives Walmart exclusive access to sell eBooks and audiobooks for the publishing/media arm of Rakuten known as Kobo.
“Rakuten is a strong e-commerce business and we’re excited to collaborate with the top online shopping destination in Japan,” Walmart CEO Doug McMillon said in a statement. “Here in Japan and everywhere we operate, we’re constantly exploring new ways to make every day easier for customers by offering great experiences in stores, online, via mobile — no matter how customers want to shop.”
Rakuten CEO Hiroshi “Mikey” Militani said the two companies were “uniquely positioned to empower our customers around the world with innovative services. We are excited to partner with Walmart because of its commitment to creating the best solutions to serve customers with low prices.”
Rakuten Seiyu Netsuper will be the new joint venture to manage the online grocery delivery service. Walmart said each company is supporting the venture, but the retailer did not disclose its investment. The joint venture will establish a dedicated fulfilment center and use Walmart-owned Seiyu stores for picking items slated for delivery. Rakuten will create a site for the services of the new venture. Aside from grocery delivery, the venture will also offer meal kits and ready-to-eat foods.
The Yano Research Institute pegs the food delivery market at about $19 billion annually in Japan. Statista estimates retail e-commerce in Japan will grow from $111.33 billion in 2017 to $122.46 billion this year and to $134.1 billion by 2019.
The Rakuten/Walmart deal also has the ability to boost U.S. sales as Walmart will be the exclusive retailer to offer e-reading products from Kobo, a market predominantly ruled by Amazon. Walmart and Kobo plan to release a co-branded Walmart/Kobo e-reading app for iOS and Android as an alternative to Amazon’s Kindle app, as well as a desktop app.
“We are adding an entirely new category to our U.S. assortment — e-books and audiobooks,” said Scott Hilton, chief revenue officer for the Walmart U.S. e-commerce business. “We have long been a destination for entertainment including digital content – whether movies through VUDU or the digital game cards we sell in our stores. eBooks and audiobooks are a great addition to our assortment. Working with Rakuten Kobo enables us to quickly and efficiently launch a full eBook and audiobook catalog on Walmart.com to provide our customers with additional choices alongside our assortment of physical books.”
Strategic partnerships with large e-commerce players are one of the ways Walmart has sought to grow its market share. The Rakuten partnership follows six e-commerce acquisitions in the past 18 months to shore up its U.S. e-commerce business. Walmart also partnered with Google in 2017 to sell products on Google Express and GoogleHome.
McMillon was in India last week which sparked rumors of renewed talks between Walmart and online startup Flipkart which is popular in that market. India’s Economic Times reports Walmart is negotiating a 15% to 20% stake in Flipkart valued at $14.2 billion. Walmart has not confirmed any such deal but rather said McMillon was in India to meet with Walmart teams there.
Other sources cited by local reports in India indicate McMillon, Marc Lore, head of Walmart’s U.S. e-commerce, and Judith McKenna, the newly named CEO of Walmart International, were in Flipkart’s offices last week.
Dr. Annibal Sodero, assistant professor of supply chain at the University of Arkansas, said the Indian market is important for Walmart and Amazon given its massive consumer base. Sodero said the highly fragmented market of India has been a challenge for Walmart’s brick and mortar system but e-commerce through a partnership would give Walmart a shot to increase its overall market share.
“Look at how Wal-Mart ultimately chose to grow e-commerce share in China against Alibaba. They partnered with JD.Com to run their Yihoadian business because that was the best way to participate in a larger share of the business,” Sodero explained.
FlipKart’s expertise in slash sales events is a different business model than Walmart and it has not been without issues, when advertised products sell out quickly leaving customers frustrated, according to Sodero. He said Flipkart is also vertically integrated and sells electronic brands like Apple. He said this is an interesting play for Walmart who also is a seller of brands.
Carol Spieckerman, CEO of Spieckerman Retail, has said some global markets like India are better scaled through digital commerce. She said Flipkart could give Walmart a digital presence much the way Jet.com did in the U.S. She said Flipkart can also benefit from Walmart’s scale and expertise.