25 Jun

Another Retailer Crumbles in China as e-Commerce Sales Rise

WRITTEN BY Mohit Oberoi, CFA

Retailer

French retail giant Carrefour has agreed to sell an 80% stake in its China operations for ~$705 million to Suning.com, an Alibaba (BABA) backed company. While China represents a massive opportunity with its almost 1.4 billion population, it has not been an easy market for foreign companies, at least when it comes to retail and e-commerce.

Macy’s has already exited China, and Walmart (WMT) and Tesco have sold partial stakes to domestic Chinese companies. Walmart sold its China e-commerce business to JD.com (JD) in 2016. Germany-based Metro AG is also reportedly planning to sell its China operations. Amazon (AMZN), which has had great success in the United States, as well as emerging markets like India, is also planning to close its e-commerce store in China.

Tough market

To be sure, it has never been easy for foreign companies to do consumer-focused business in China. US automotive giants like Ford and General Motors also had to form joint ventures to capture the Chinese market. However, retail has been an even sorrier story for foreign companies. Even after spending years in China, Walmart hasn’t been able to make a mark in the country. With growing e-commerce sales, life has become even tougher for foreign retail companies in China. Online retail sales increased 17.8% year-over-year in China in May, more than twice the growth in overall retail sales.

Alibaba and JD.com

Alibaba is reportedly thinking of a Hong Kong listing. The company has also announced a share split and restructured its top management. Alibaba’s chair and co-founder Jack Ma is set to retire later this year. Alibaba has gained 22.6% so far in 2019, while JD.com stock up 38.1% year-to-date.

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