WalMart has been trying to expand past its brick-and-mortar operation with new offices in Silicon Valley and e-commerce distribution centers. After the acquisition, Jet.com founder, Marc Lore, will continue to lead the online division for the upcoming years. For Walmart, Amazon has become an existential threat as more Americans have been buying household items online: Amazon’s 2015 sales revenue included almost $80 billion in product sales, and the company accounted for 60 percent of the year’s growth in USA online sales growth. Jet co-founders Mike Hanrahan and Nate Faust were also part of the Quidsi team. They expect the deal to close by the end of this year following due regulatory approvals. Wal-Mart and Jet plan to maintain distinct brands, with Wal-Mart’s website continuing to focus on emphasizing the company’s “everyday low price” strategy.
Advertisement
Jet.com was founded in 2014, and various outlets were quick to call it an “Amazon-killer”.
Walmart said Jet had showed it was able to grow quickly, reaching Dollars 1 billion in annual gross merchandise sold and 12 million products offered in its first year.
Mr. Lore, who currently owns about a quarter of Jet.com, will now report directly to Walmart CEO, Doug McMillon.
To build hype around the brand, Jet.com has poured money into marketing, hiring R/GA and media agency Maxus to create a Super Bowl ad. In some high-density regions such as New York City, Jet often can offer same-day delivery at no additional cost.
Walmart has pledged to spend more than $1 billion on e-commerce and digital capital expenditures this fiscal year. Customers are encouraged to add various tagged items to their shopping carts, which can be shipped more cheaply in the same box from a nearby vendor.
“The impact on Amazon will be fairly benign”.
The deal should give Wal-Mart the scale to bolster its online presence, broaden its assortment of goods and offer the lowest prices at the same time, analysts said. While Wal-Mart is one of the biggest online retailers in the US, its online growth has slowed in the past few quarters.
O’Shea noted that Wal-Mart is “paying a lot” for Jet.com, but “no one knows whether they’ve paid too much or too little”, he said. Walmart’s sales, overall, still far outstrip Amazon’s at 2 billion, but its e-commerce sales, at $12.5 billion- just 2.5 percent of its total sales-have been slowing in the past two years.
Advertisement
Lore previously started the similar e-commerce company Daipers.com, which he sold to Amazon for $550 million in 2011. Jet bought Omaha-based Hayneedle in February for $90 million, according to documents obtained at the time by The World-Herald. Three months, after Jet.com launched, it ditched its annual membership fee of $49.99, leading critics to question the business model.
