Wal-Mart acquisition of Mexican Cornershop for $225 million to spur app-based food delivery services

The strategic acquisition has multiple sweet spots: not only it places Wal-Mart on a better footing in its competition with its peer – Amazon.com Inc, it will also provide Wal-Mart crucial learning experience which it can use in other markets.

In a move that will enable Walmart Inc to increase its footprint in Chile and Mexico, the world’s biggest brick-and-mortar store stated it will acquire Cornershop, a Latin American food delivery service company for $225 million.

The deal underscores Wal-Mart’s growing ability to better compete with its peer Amazon.com – the world’s largest online retailer.

With the news reaching the market, shares of Walmex, Wal-Mart’s Mexico division, jumped by more than 3% to touch their highest level since late July.

According to analysts, the acquisition will enable Walmart to offer its service through a mobile app which will help quicken deliveries for its Sam’s Club and Superama stores in Mexico

“We believe the transaction is positive and will result in greater efficiencies and higher growth in online sales,” said Signum Research in a report.

Walmex said it would absorb Cornershop’s Mexico operations.

For the U.S. market, Walmart said, it aims to tap delivery companies including Uber Technologies Inc for food deliveries to more than 40% of U.S. households by the end of this year. For Canada, Wal-Mart aims to team up with startup Instacart for on-demand grocery deliveries.

Traditional retailers in Mexico are heavily sinking in funds and boosting their investments in technology and logistics to meet growing demand for online shopping. Mexico represents a huge market since currently only 3% of all retail sales in Mexico are done online, according to Euromonitor International, a market research firm.

Amazon.com Inc has already begun selling nonperishable groceries online in Mexico.

Wal-Mart said, it expects to close the Cornershop deal by the end of this year while adding that the app would remain an “open platform” serving various grocery and specialty food stores.

According to Judith McKenna, chief executive of Walmart International, the deal is expected to provide a valuable learning experience which it can use in other markets.

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