Walmart steps up China e-commerce bet with sale of site to Alibaba rival

Walmart (WMT) said Monday that it is selling its Yihaodian e-commerce portal to one of China's top top online retail companies in a bid to boost sales in the difficult-to-crack market.

Walmart will take a 5% stake in the buyer, JD.com (JD), which bills itself as China's largest e-commerce site when measured by revenue, a sign of how closely the two companies plan to work together. JD.com, a major rival to Chinese online giant Alibaba Group, is issuing 144.9 million new shares as part of the deal.

JD.com "has a very complementary business and is an ideal partner that will help us offer compelling new experiences that can reach significantly more customers," said Walmart CEO Doug McMillon in a statement.

He says through the partnership, Chinese consumers will have more access to high-quality imported goods. Walmart says they will be offered through a big presence by Sam's Club China on the JD.com site. Buyers can then take advantage of JD.com's ability to deliver purchases same day or the next day.

Given Walmart's massive scale — its fiscal 2016 revenue was $482 billion — the deal itself isn't huge, says Edward Jones analyst Brian Yarbrough. But it's significant because it shows McMillon's leadership team is getting serious about trying to boost returns in foreign markets, which have soaked up lots of capital with lower profits than the the giant retailer has come to expect in the U.S.

"One of the big complaints by investors is (Walmart) continues to pile tons of capital into these international markets, but the returns aren't acceptable," Yarbrough says. Over the long term, the JD.com deal should provide high scales, he adds.

Leading up to Monday's announcement, Walmart ranked sixth in China's online market with 1.6% market share. By comparison, Alibaba led with 46.9% and second-ranked JD.com had 20.1%, Euromonitor International, a global research firm, reported earlier this year. Yet Yihaodian is no small operation. It operates 250 hubs covering 200 Chinese cities with operation that can, in many cases, deliver groceries in less than three hours.

The two companies said the deal encompasses a "wide range of business initiatives." Walmart is counting on JD.com to make inroads with consumers in eastern and southern China, including with its grocery business.

JD.com will take control of the Yihaodian brand, while Walmart will continue to operate Yihaodian's direct-sales business.

Contributing: The Associated Press