Wal-Mart Set to Cash In on Chinese Online Boom

The convenience factor of online shopping is sure hard to beat. Many people nowadays prefer to shop online from the comfort of their homes, rather than wait in endless queues at nearby stores. The world's largest retailer, Wal-Mart Stores (NYS: WMT) , seems to understand this as it looks to increase its stake in Chinese e-commerce firm Yihaodian to 51%.

Apart from providing an increased exposure to one of the fastest growing consumer markets in the world, the company's majority holding in Yihaodian should also help bring in more revenue from international operations.   

The Chinese online space
Nearly 173 million people in China shop online, and the e-commerce space is expected to exceed $118 billion gross merchandise value for last year -- which, interestingly, is more than Vietnam's GDP. Plus, according to a Boston Consulting Group report, the Chinese e-commerce market is expected to become the largest e-commerce market by 2015.

Yihaodian, which started just four years ago, has grown in leaps and bounds. It has become one of the fastest-growing companies in China and currently deals in more than 180,000 products ranging from groceries and electronics to apparel. Its customer base is growing almost daily, and the company offers either same-day or next-day delivery.

The 'Mart's been here before
Back home, online sales constitute a very small proportion of Wal-Mart's income, contributing to sales of dried and packaged foods, along with general goods. The Bentonville behemoth has sought to increase its know-how in the sphere. It bought over social media firms such as Kosmix last year. The same year also saw Wal-Mart selling groceries on a small scale in a pilot initiative called Wal-Mart to Go.

Sales at Wal-Mart's 350 Chinese stores rose 16.1% last year, as customers bought more per visit, but overall customer traffic fell by 7.1%. This could be one of the reasons why the company is digging deeper into e-commerce. But more importantly, the Yihaodian move indicates Wal-Mart's intention to take advantage of the booming online business in China.

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At the time this article was published Fool contributor Shubh Datta doesn't own any shares in the companies mentioned above. The Motley Fool owns shares of Wal-Mart Stores.Motley Fool newsletter serviceshave recommended buying shares of Wal-Mart Stores.Motley Fool newsletter serviceshave recommended creating a diagonal call position in Wal-Mart Stores. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.

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