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Walmart looks to dominate overseas with grocery-delivery app investment

Retail behemoth Walmart has invested $50 million into local Chinese logistics and grocery delivery platform New Dada in a move that will proliferate the company’s reach overseas and help corner mobile delivery.

The investment is a continuation of a larger partnership with Chinese electronic commerce company and New Dada, and will give all 25 million users on New Dada’s network access to two-hour grocery delivery from Walmart via the JD Daojia Dada app. The maneuver is part of Walmart’s long-term global growth plan and will act as a case study in the variety of mobile infrastructure that will be necessary for expansion into foreign markets.

“As Walmart perfects the platform and process for 2-hour grocery delivery in China, it will make it easier for it to expand this service to other international markets,” said David Naumann, vice president of marketing at Boston Retail Partners.

Global expansion
While the investment into New Dada seems like a hefty sum, it is indeed a calculated move for Walmart, a corporation that already has a presence of 426 stores in 170 cities in the country. The move comes at a point in Walmart’s growth trajectory in China where it already has an established brand identity in the country and is looking for avenues to maximize customer service and convenience, all while optimizing its supply chain.

The partnership with New Dada seems could be a perfect match. The platform possesses more than 2.5 million crowdsourced deliverers in 300 cities in addition to its millions of existing users, which means that the 20 Walmart stores within this pilot program will most likely be the first few of many stores that will participate.

Users who live within a three-kilometer radius of participating stores will be able to order groceries from Walmart to have them delivered within the two-hour window, which will optimize consumers’ time and provide jobs much in the same way similar crowdsource apps such as Uber and Postmates do.

And when looking at relevant mobile use statistics, it looks as though the Chinese consumer is more than ready to leverage this partnership.

“Chinese online users are more frequent users of smartphones than U.S. online users and they spend more time per day on their smartphones,” Mr. Naumann said. “The pervasive use of smartphones and mobile apps in China probably played a role in the strategic investment in the Dada local on-demand logistics platform.

“Consumers rely on their smartphones for most of their Internet usage and retailers need to make sure everything is mobile friendly.”

The deal will provide expanded access to Walmart’s groceries

Catering to the market
Retailers and brands must make sure that they have an astute game plan to approaching the Chinese market; not all homegrown tactics will resonate with the Chinese consumer. Apple learned the hard way when low penetration of near-field communication technology caused a stunted Chinese rollout of Apple Pay (see story).

Brands have found one way to appeal to the Chinese consumer: to actually highlight the Chinese consumer. Chinese department store chain Lane Crawford has set a good example through its #15SecondsWith campaign, which put a spotlight on Chinese creative ahead of the Hong Kong AmfAR gala (see story).

“There are a number of factors that are driving consumers’ elevated expectations of speedy delivery services in China,” Mr. Naumann said. “The growing middle class of Chinese consumers are digital savvy and accustomed to buying a lot of goods online.

“According to market research, 50% of Chinese consumers purchase grocery online compared to only 10% of U.S. consumers. The other driver of quick delivery service is the extremely competitive environment for online commerce created by the dominant leader: Alibaba.

“Alibaba continues to raise the bar on competitive prices and fast service and this has elevated the expectations of consumers in China. It is more about expectations than need.”