The retail giant announced Monday that it will acquire e-commerce start-up Jet.com for $3 billion in cash, a portion of which will be paid over time, in addition to $300 million of Walmart shares.
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The deal has been approved by the Boards of Directors for both companies but is still subject to regulatory approval.
Jet.com was founded in 2014 by Diapers.com founder Marc Lore.
In its latest fiscal year ended January, Wal-Mart generated online sales of $13.7 billion, a fraction of its total revenue of $482.1 billion.
Walmart launched its e-commerce site more than 15 years ago and now operates online sites in 11 countries.
The company is obviously hoping that the acquisition of Jet.com will help them take on Amazon with their online sales.
The acquisition of Jet is a “jolt of entrepreneurial spirit” that will help Walmart speed efforts to lower prices, expand product assortment and offer an easy shopping experience, Walmart president and CEO Doug McMillon said in a statement.
Since its launch, Jet’s business has grown dramatically, adding more than 400,000 new customers every month and processing an average of 25,000 orders per day. The site sells more than 12 million products through its own warehouses and a network of third-party sellers.
“We believe “catching” Amazon online is an unrealistic goal”, said Moody’s lead retail analyst Charlie O’Shea, though the transaction shows Wal-Mart is serious about becoming a strong No. 2 player in e-commerce.
Wal-Mart Stores made a major investment in jet.com to bolster its online presence.
Launched in July 2015, the New Jersey-based Jet began as a members-only shopping club with an annual subscription fee of $49.99 but dropped that fee in October. About a year ago, Walmart made a decision to transform itself into a seamless shopping experience for consumers by introducing Shipping Pass, a service which offers unlimited, free three-day shipping for only $50 annually, less expensive than Amazon’s Prime program.
Jet.com has also faced plenty of challenges.
Over time, the company has changed its business model.
But Jet.com is not a discount site.
In May, Lore told The Associated Press that Jet.com had expected to reach overall profitability in 2020 and to hit $20 billion in general merchandise value with 15 million customers.
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“I’m definitely in this for the long haul”, Lore said. Wal-Mart and Jet.com each declined to comment on that that report. Its shares are up 3 percent over the past year.
