Wal-Mart, JD.com Get Physical With Launch of Brick-and-Mortar Store in Shenzhen

(Beijing) — Wal-Mart and Chinese e-commerce platform JD.com have jointly launched a brick-and-mortar store in the city of Shenzhen as they deepen ties and as JD.com expands into offline sales.

The new co-branded store, which opened Sunday, will showcase JD.com Inc.’s best-selling items — including electronics and books — and allow customers to interact with the physical goods in person.

The new project comes at a time of deepening ties between Wal-Mart Stores Inc. and JD.com Inc. The American retail giant bought a roughly 5% stake in JD.com in June 2016, increasing it to 12% this February, and launched an online flagship store on the e-commerce platform in May.

After a decade of rapid growth in the online-business industry in China, a new trend of combination online and offline stores has begun to emerge, as consumers discover their e-commerce experience can occasionally be unpleasant due to frequent counterfeit products, delays in courier service and other problems.

All of China’s main online marketplace operators, including JD.com’s major rival, Alibaba Group Holding Ltd., have now made forays into offline retailing. JD.com’s two main partners are Wal-Mart and China’s leading supermarket chain, Yonghui. JD.com offers courier services for about 200 Wal-Mart and Yonghui stores in China.

This year, JD.com made its first-ever quarterly profit, of 356 million yuan ($52.3 million), compared with a loss of 867 million yuan a year earlier, thanks to a slowdown in expenses growth.

As a way to save costs, all of the offline initiatives are “on a franchise model, so they are not asset-heavy,” company CEO Richard Liu Qiangdong said during an earnings call in May.

Liu said JD.com plans to launch its offline businesses into both population-dense areas as well as locations like rural areas where shoppers may find it difficult to reach e-commerce because of poor internet connectivity and a lack of courier services.

JD.com Vice President Yan Xiaobing said earlier that the company would expand its offline presence by opening 10,000 brick-and-mortar stores this year and enter into the home-appliance market in rural areas.

Contact reporter Coco Feng (renkefeng@caixin.com)