Walmart is falling behind in China's big e-commerce market
Walmart is facing stiff competition in China's e-commerce market from two heavyweights, JD.com and Alibaba who own 20% and 47% of the market, respectively. The US retail giant accounts for only 1.6% of the market, highlighting the difficulty they face in trying to make an impact. However, there is room for improvement, in particular the number of warehouses it uses to reach Chinese consumers that the company needs to increase. As a comparison, JD.com has nearly 6,000 warehouses and pick-up points, with Alibaba running 14,000 warehouses in rural areas only. Walmart plans to focus on its grocery e-commerce business as a way to attract new consumers.

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Walmart is up against two heavy hitters, Alibaba and JD.com, in China's e-commerce market. And thus far, it's lagging far behind.

The retail giant took complete ownership of China-based e-commerce site Yihaodian last July after it bought all remaining shares from China-based financial services group Ping An. But Walmart has yet to have a significant effect in China just yet, as it accounts for just 1.6% of the country's online market, according to Business of Fashion.

Contrast this with Alibaba, which owns 47% of the market, and JD.com, which owns 20%. This gives Walmart plenty of room to improve, especially with regard to the number of warehouses it operates in order to reach more of the Chinese population.

Yihaodian operates 250 warehouses in 200 Chinese cities, while Alibaba operates 14,000 in rural China alone. And these Alibaba warehouses also serve as pickup stations for customers. JD.com, meanwhile, has almost 6,000 delivery warehouses and pickup stations.

Walmart will focus significantly on its grocery e-commerce business in China to draw in new customers. Approximately 46% of Chinese shoppers buy their groceries online, according to Nielsen, and Walmart clearly wants to tap into this market. Yihaodian currently offers 250,000 products for same-day delivery, and groceries are on that list, so expect the company to heavily build out this inventory.

Walmart also launched an app in China last year exclusively for click-and-collect fulfillment. This could be particularly appealing to online grocery shoppers, as they could address any concerns they have about their purchases in person.

The company is also focusing on its imported goods business in China. In March, Walmart announced it would expand these goods through Global E-Buy, a cross-border e-commerce service inside the Walmart China app specifically offering foreign-made goods. This service offers approximately 200 products, including some popular U.S.-based brands such as Starbucks, Aveeno, and Burt's Bees.

Global E-Buy meets a growing desire among Chinese consumers for foreign goods, particularly from the U.S. More than 60% of Chinese consumers are willing to pay more for products made in the U.S. rather than China, even with concerns about quality and safety.

Walmart has a chance to tap into a thriving market, as there's never been a better time to be a consumer. The rise of online and mobile shopping has given consumers more choice, flexibility, and often better service, and retailers are shifting their strategies to keep up.

Cooper Smith, senior research analyst at BI Intelligence, Business Insider's premium research service, has compiled a detailed report on new e-commerce strategies that looks at some of the top trends affecting retailers at each stage of the purchase funnel and how they're responding to those shifts.

Here are some of the key takeaways:

Within digital, consumers are spreading out their retail purchasing across channels, forcing retailers to spread out their online marketing budgets. Paid search, affiliate marketing, and email all increased their share of e-commerce referrals last year, according to Custora.

Paid search especially stood out as a major source of spending by retailers. Search ad spending grew 18% YoY in Q4 2015, according to IgnitionOne.

Mobile continues to drive the most sales growth for retailers, but sales still aren't keeping up with retail traffic. IBM found that smartphone traffic beat both tablet and desktop, making up 53% of all online traffic. But mobile still only accounted for 29% of all online sales.

Retailers only have themselves to blame for underperformance on mobile, as many still aren't using best practices for mobile websites and apps. Only 60% of the top 100 global retailers currently have a dedicated mobile website, according to The Search Agency.

The increase in online shopping has put stress on the shipping and logistics industry. The number of UPS ground packages delivered on time during the holidays fell from 97% in 2014 to 91% in 2015, according to ShipMatrix.

Retailers are beginning to explore alternative shipping options. Earlier this year Gilt Groupe switched its primary ground shipper from UPS to Newgistics.

Retailers that can't afford to invest in alternative shipping options are offering consumers more fulfillment options using what many of them do have — brick-and-mortar stores. Buying online and picking up in-store, also called click and collect, made up about 30% of e-commerce sales at Sam's Club in 2015.

In full, the report:

Looks at how retailers are shifting their ad spending and marketing efforts to keep up with online retail behavior

Identifies which channels are top performers for referral traffic and new opportunities for reaching consumers

Analyzes how retailers are responding to the rise of mobile purchasing and where they're falling short

Examines the evolving delivery landscape and the aggressive moves retailers are making to become their own shipping carriers

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