Walmart Overhauls Yihaodian 沃尔玛整合一号店管理层
There are a few interesting news bits on the e-commerce front, led by word that Walmart (NYSE: WMT) is busy overhauling the management at its newly acquired Yihaodian online store, in what looks like a questionable move that could set the company up for failure. Meantime, media are also reporting that the e-commerce arm of Tencent (HKEx: 700) is launching a direct assault on Jingdong Mall, in the latest chapter of China’s never-ending online price wars.
This latest round of China price wars might be alarming under other circumstances, as Tencent’s recently formed 51Buy e-commerce unit has lots of money to spend and has said before that it wants to rapidly gain market share. But against the backdrop of China’s non-stop online price wars, this looks like just another battle in a much bigger war.
But for now let’s return to Walmart, as the US retailer’s new moves really do look a lot like similar strategies of other major western web firms in China that ultimately ended in embarrassing failures. Walmart bought a minority stake in e-commerce firm Yihaodian more than a year ago, and recently raised that to a controlling 51 percent stake as it tries to grab a place in the ultra-competitive e-commerce market.
Now media are reporting that Walmart is making “adjustments” to the Yahaodian executive team, which includes bringing in a number of its own managers. (Chinese article) Some of the moves are detailed in the report, but the basic gist looks like Yihaodian executives are being moved into less important positions and being replaced by Walmart people.
This strategy is understandable for a newly acquired asset, but has proven disastrous in the past for other major western firms. Most notably, Yahoo (Nasdaq: YHOO) and eBay (Nasdaq: EBAY) both purchased leading Chinese websites in search and online auctions nearly a decade ago, and then proceeded to clean out their management and replace them with more experienced western-style executives.
Chinese web historians will know that this strategy ended in spectacular failure for both companies, with both Yahoo’s and eBay’s former superstar assets ultimately becoming non-players in the market. Walmart could soon follow down a similar road if it isn’t careful, especially because Yihaodian is really just a minor player in the market right now.
Moving back to Tencent, media are reporting the company’s 51Buy.com e-commerce site has launched a new campaign specifically guaranteeing its prices will be lower than those for comparable products on Jingdong Mall, which also goes by the name 360Buy. (English article) This looks like part of a promotion that first made headlines last month, when media reported that Tencent’s e-commerce unit had budgeted 300 million yuan, or nearly $50 million, for a new promotional blitz. (previous post)
Media have been reporting that Alibaba and other major e-commerce sites are launching similar promotions for the first part of November, which is an important fall shopping period. I expect these latest price wars will lead to lots more red ink for all of the industry’s players, which will show up in their fourth-quarter earnings reports.
Bottom line: Walmart could be preparing Yihaodian for failure with its new management changes, while a new round of November online price wars will push all companies deeper into the red.
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