WMT Walmart Inc

By Sarah Nassauer and Mayumi Negishi 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (January 26, 2018).

Wal-Mart Stores Inc. is joining with Japan's largest online retailer, Rakuten Inc., to bolster its efforts to compete with Amazon.com Inc. in Asia and the U.S.

The two companies said Thursday they would form a joint venture to sell online groceries in Japan and work together to sell e-books and audiobooks in the U.S.

Wal-Mart's local retail brand, Seiyu GK, will join with Rakuten to expand its online grocery-delivery service in the second half of this year. The partnership will include opening a combined e-commerce fulfillment center in the Tokyo area to deliver groceries to a wider area.

The partnership could boost Wal-Mart's position in a promising business where Amazon isn't yet strong. Japanese spent about $19 billion on food deliveries in the year ended March 2017, including orders made in person, over the phone or online, according to Yano Research Institute. That number is growing as more women work and the elderly population rises. Rakuten shares jumped during Tokyo trading Friday when the deal was announced and closed 4.5% higher.

But Wal-Mart faces plenty of other competitors in food delivery, such as stores owned by Seven & I Holdings Co., the Tokyo-based parent of the 7-Eleven convenience-store chain. Food cooperatives and smaller ventures that target niche markets, such as organic vegetables, are also vying for customers. Wal-Mart and Rakuten said they would offer meal kits, a product already sold by many of their rivals.

In the U.S., Wal-Mart will work with Rakuten's Canadian unit, Rakuten Kobo, to offer for the first time e-books and audiobooks in the U.S., as the company tries to make walmart.com, a destination for a wider variety of purchases and activities.

The deal "enables us to quickly and efficiently launch a full eBook and audiobook catalog on Walmart.com," Scott Hilton, chief revenue officer for Wal-Mart's U.S. e-commerce unit, wrote in a blog post Thursday. The digital books could also be offered in stores.

Amazon, which started as an online bookseller and has grown rapidly into other categories, dominates the U.S. market for e-books and has sold millions of its Kindle e-readers. Kobo sells its own e-reader device, which Wal-Mart will now carry.

Wal-Mart has expanded its U.S. e-commerce sales in recent quarters after rolling out online grocery services and buying a string of online startups, including Jet.com Inc. in 2016, placing the site's founder Marc Lore at the head of U.S. e-commerce operations.

In Japan, both Rakuten and Wal-Mart are struggling to keep Amazon at bay. In 2016, Japan was the second-largest market outside the U.S. for Amazon, following Germany, with sales of $10.8 billion.

Wal-Mart has moved away from building its own stand-alone e-commerce sites and infrastructure internationally. Two years ago, Wal-Mart sold its Chinese e-commerce business Yihaodian to JD.com Inc. and holds a roughly 10% stake in China's second-largest e-commerce company after Alibaba Group Holding Ltd.

Wal-Mart and Rakuten declined to disclose the financial terms of the deal. Under pressure from Amazon, Rakuten's e-commerce profits are stalling despite growing revenue, prompting it to search for new businesses.

Last month, Rakuten said it was applying for spectrum to become Japan's fourth major cellphone carrier. Overseas, it has bought messaging app Viber and invested in ride-hailing service Lyft Inc.

Write to Sarah Nassauer at sarah.nassauer@wsj.com and Mayumi Negishi at mayumi.negishi@wsj.com

(END) Dow Jones Newswires

January 26, 2018 02:47 ET (07:47 GMT)

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