Walmart bought the remaining 49 percent stake in Yihaodian last year when Yihaodian's founders left to start a new venture, taking the cream of the executive suite with them.
"The acquisition of Yihaodian didn't yield the desired outcome for Walmart, primarily due to different business models," said Jason Yu, general manager of Kantar Worldpanel China. "E-commerce players rely on aggressive promotions to secure market position, while Walmart took a more balanced approach to drive profits."
He added, "Convergence between online and offline players is the new trend, with e-commerce giants needing brick-and-mortar retailers to drive profits and offline merchants needing to attract more online consumers."
Business-to-consumer online sales in the first quarter rose 39 percent from a year earlier to 522.4 billion yuan (US$80 billion) and are expected to continue increasing as websites cater to buyers seeking high-quality products and reliable services, according to iResearch.
Walmart's eagerness to latch onto a strong domestic partner partly reflects some lackluster performance in China retailing. Sales in the whole sector, both online and offline, rose only 2 percent in the first quarter.
Offline sales of consumer goods, like personal care products and food, across China fared particularly badly, while purchases of the same goods through e-commerce channels jumped 48 percent in the first quarter, according to Kantar Worldpanel.
The online sales surge is partly due to aggressive discounting by Alibaba. Since the second half of last year, it has been cutting prices on food and daily consumer product. In some cities, consumers are offered deep discounts to purchase merchandise from Alibaba's Tmall stores.
Some of the competitive field in online retailing is regional in nature. Alibaba is strong nationwide. JD.com also has a nationwide market, though its strength originated in northern China. Yihaodian has its greatest inroads in the Yangtze River Delta region. Walmart has been strengthening its position in northern and western region.
"The alliance with JD looks like a defensive move by Walmart rather than an expansion into new territory," said Wang Penghui, a Shanghai-based independent observer of the online shopping sector. "Walmart increasingly is feeling the challenge of Tmall's bold moves into northern parts of the country."
