The Growing Value Of Cross-Border Friends

For the first time in a while, cross-border commerce is dominating the news cycle. That’s all thanks to Apple, which by hook or by crook somehow managed to outwit or out-wait the Indian government and its insistence on regulations that would’ve made opening up Indian storefronts a tremendously expensive proposition. Now, though, Cupertino is the owner of a shiny five-year moratorium from said policies and is clear to start earning its piece of the cross-border pie.

But amid all the celebration, there’s an unpleasant fact rearing its head for most major players in the cross-border commerce scene: It’s getting progressively difficult to go it alone.

The first piece of evidence comes from Walmart’s unexpected announcement that it would sell Yihaodian, Walmart’s eCommerce presence in China, to JD.com. In return, Walmart will receive close to 5 percent of JD.com’s shares, worth about $1.5 billion based on the company’s most recent stock prices.

The devil is in the details, though, and the details show Walmart’s true ambitions. Rather than a cut-and-dry acquisition, the deal stipulates that JD.com becomes the owner of Yihaodian while Walmart retains control over direct sales. Their supply chains will be integrated, with a particular emphasis on importing more goods into the country, and the Walmart brand will receive preferential promotion on all existing JD.com platforms and marketplaces.

That reads not so much as a sale as it does a strategic partnership, and wouldn’t you know it, when CEO Doug McMillon announced it, the language used was that of commitment and cooperation – well into the future.

“JD.com shares similar values in making the lives of customers better,” McMillon said in a statement. “It also has a very complementary business and is an ideal partner that will help us offer compelling new experiences that can reach significantly more customers. We also look forward to offering customers a tremendous number of quality imported products not previously widely available in China through Walmart and Sam’s Club.”

In the larger scheme of things, it makes perfect sense that Walmart would want to sell of its control of Yihaodian in exchange for a cross-border ally like JD.com. On its own, the retailer managed to capture just 1.6 percent of the Chinese eCommerce market as of March, and whether it’s a lack of boots on the ground or lack of experience with Chinese consumers, that kind of market share isn’t going to float many cross-border efforts for long, especially as traditionally strong markets continue their disconcerting downturns.

But financial hardship isn’t the only force driving retailers with cross-border ambitions into the waiting arms of brands who’ve already set up shop. One would be hard-pressed to find the evidence that Amazon doesn’t know what it’s doing when pulling off an international expansion, and its Indian group has been busy working on a sticky cultural issue – namely, few consumers are familiar enough with this new eCommerce brand to trust them with their purchases.

To that end, Amazon has made a deal with telecom provider Vodafone, operator of some 10,000 kiosks and storefronts across India, to install Amazon showcase booths complete with Amazon-trained reps in 40 stores to increase its brand recognition. If all goes well, it’s hard not to see Amazon expanding this program to as many Vodafone stores as is amenable to its new partner.

For the moment, these deals seem to benefit both indigenous and emigrant brands involved. JD.com gets greater access to Walmart’s foreign inventory and Vodafone gets an exciting new reason for shoppers to hang around their stores.