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Woolworths Limited is officially moving into China

Credit: Jonathan

What: Woolworths Limited (ASX: WOW) looks set to try its luck in China with an announcement released to the ASX by eCargo Holdings Ltd (ASX: ECG) stating that Woolworths is planning to launch an online store on Tmall.

eCargo described Tmall as “the largest B2C online marketplace in China today.”

So What: While Woolworths’ entry into the huge Chinese food and grocery sector is not considered material to the supermarket operator at present – hence the company did not release an announcement to the market – the decision of Woolworths to engage the China-based but ASX listed eCargo to help build its presence certainly was material.

As you can read here, the news sent the share price of eCargo up over 200%!

eCargo is a relatively unknown, recently listed eCommerce technology company that operates in both Australia and China with the aim of providing on-demand digital commerce technology development and related execution capabilities for retailers and fashion brands.

Now What: According to the release, eCargo “will coordinate Woolworths’ inventory, packaging and distribution requirements, advice on brand entry strategy and undertake a wide-range of digital and social marketing activities for Woolworths.”

It’s certainly an interesting move by Woolworths in light of some of the recent publicity surrounding Chinese demand for Australian produce, particularly baby formula and vitamins which has led to a surge in the share prices of Blackmores Limited (ASX: BKL), Bellamy’s Australia Ltd (ASX: BAL) and A2 MILK FPO NZ (ASX: A2M).

Given the mammoth size of Woolworths’ sales revenue however, in the near term its online entry into China is unlikely to have any meaningful effect on the group’s earnings, which means investors will continue to focus on the pressures surrounding the retailer’s domestic businesses.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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