Walmart revealed today that it will be divesting the majority of its ownership in Seiyu, the Japanese supermarket chain it purchased twelve years prior, to KKR and Rakuten. This transaction establishes Seiyu’s value at approximately $1.6 billion and signifies Walmart’s near-complete withdrawal from the Japanese market.

As outlined in the agreement, the investment company KKR will acquire a 65% ownership position in Seiyu, while Rakuten, Japan's leading e-commerce provider, will secure a 20% stake via a newly established entity known as Rakuten DX. Walmart will maintain a 15% ownership stake in Seiyu.

Following challenges posed by intense competition within Japan and limited profitability, Walmart explored options last year, including potentially relisting Seiyu or its parent company, Walmart Japan Holdings.

Rakuten already possesses insight into Seiyu’s operations through a strategic partnership formed in 2018, which involved the launch of an online grocery delivery platform in Japan. This service, known as Rakuten Seiyu Netsuper, features a specialized fulfillment center alongside products sourced from Seiyu’s supermarket locations.

Following the completion of this deal, Seiyu will become integrated into Rakuten DX, with the goal of expanding the online presence of physical retail locations by leveraging Rakuten’s e-commerce capabilities and cashless payment systems.

The Japanese market for online grocery delivery has historically lagged behind other nations, partly due to consumer hesitation regarding the online purchase of perishable goods. However, the COVID-19 pandemic catalyzed a significant change in consumer behavior. A report published by the Japan Times on July 4th indicated that online sales represented roughly 5% of overall grocery sales, an increase from 2.5% prior to the pandemic.

Key competitors to Rakuten in this sector include grocery delivery services operated by Aeon (in collaboration with Ocado), Amazon, and Ito-Yokado.