Will Wal-Mart Crush Dangdang?

Wal-Mart (NYSE: WMT  ) wants some more online skin in China. The world's largest retailer has received regulatory approval in China for a transaction that would bump its ownership stake in Chinese e-tailer Yihaodian from 18% to 51%.

It's not really a surprise to see Western retailers approach the growth opportunities in China. Amazon.com (Nasdaq: AMZN  ) has been a force in the world's most populous nation since hooking up with joyo.com eight years ago to form what is now called Amazon China. Best Buy (NYSE: BBY  ) is hoping that its appliance stores in China can rekindle investor interest as its stateside stores sputter, though its e-commerce ambitions have a long way to go.

The news of Wal-Mart's move was enough to send shares of E-Commerce China Dangdang (NYSE: DANG  ) to a slightly lower open this morning.

Really?

Really. Investors often make the mistake of calling Dangdang "the Amazon of China," but it's not. Amazon China, Taobao's Tmall, and 360buy are considerably larger and more fitting wearers of that particular sash.

Most of Dangdang's titles are books, and two-thirds of its sales are media items. This may convey images of Amazon circa 1998, but that just doesn't hold up, given the more varied marketplaces of China's larger online retailers. General merchandise sales are growing faster than media sales at Dangdang, but it's still just a third of the company's business. The average order at Dangdang is still clocking in at less than $15.

Dangdang gets so much attention because it's the pure play trading on a stateside exchange. Amazon China is obviously part of a larger company, and 360buy would've probably gone public by now if the IPO market hadn't cooled on stateside listings for Chinese companies.

There are some noteworthy backers of 360buy. Wal-Mart was an early one. Baidu (Nasdaq: BIDU  ) CEO Robin Li is another investor. However, it doesn't help that 360buy, like Dangdang, has struggled with profitability.

Seeing shares of Dangdang fetching a third of their $15 IPO price from two years also isn't going to help Investor sentiment, even if 360buy's $3.3 billion in sales last year towers over Dangdang's $575 million tally.

Wal-Mart's presence may be seen as a competitive threat, but it's also an important form of validation. China's economic growth is slowing, but it's still moving in the right direction at a pace that would make most developed nations envious.

Wal-Mart's timing its push at an opportunistic moment.

Betting on China
There's plenty of growth still to be had if you buy the right Chinese growth stocks. To get the entire investment thesis for one of the most exciting opportunities in this space, you can grab your copy of the Fool's brand new research report on the "Google of China," Baidu. If big-time growth is what you're looking for, check this report out today.

The Motley Fool owns shares of Baidu.com, Best Buy, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Baidu.com and Amazon.com. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


Read/Post Comments (3) | Recommend This Article (2)

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  • Report this Comment On August 15, 2012, at 3:43 AM, Hosana33 wrote:

    Man they got you morons working OT on Dang i see 10 articles in 2 weeks.We get it your short Dang so get some rest now.The Motley has become useless!

  • Report this Comment On August 15, 2012, at 7:16 AM, Xavicat14 wrote:

    Again, margins of 360BUY and Amazon.ch are awfull, far worse than Dang. Both are operating at a huge loss.

    360 buy can't go IPO because it's losses are terrible. Why you omit the agreements of DangDang with powerhouses Tencent and Gome or the huge success of the new outlets channel and own brand clothes ?

  • Report this Comment On August 15, 2012, at 7:46 PM, jhlblais wrote:

    MOTLEY " JOKE " ARTICLES ARE WRITTEN BECAUSE MF IS ACCEPTING MONEY FROM SHORT HEDGE FUNDS TO WRITE NEGATIVE ARTICLES ON COMPANIES THESE HEDGE FUNDS HAVE SHORTED.

    MF CANNOT GARNER ENOUGH PAID SUBSCRIPTIONS FROM INVESTORS BECAUSE THE QUALITY OF ITS WRITINGS IS SOOOOO HORRIBLE THAT TO RAISE MONEY THEY HAVE TO ACCEPT BRIBES FROM HEDGE FUNDS TO WRITE ARTICLES FILLED WITH COUNTLESS LIES.

    What a PATHETIC outfit Motley Fool has become............its as bad as they Penny Stock newsletters that do PUMP and DUMP schemes to lure investors in.

    Congrats MF .....you have reached a new level of low .

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