The deal gives Wal-Mart, the world’s largest retailer, a boost in the e-commerce sector on which it vowed to spend $2 billion on.
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Wal-Mart said Monday it had agreed to acquire startup Jet.com for $3.3 billion, making a major pivot in an e-commerce strategy that has so far failed to excite customers and left it well behind online shopping leader Amazon.
“Wal-Mart has definitely put its stake in the ground saying, ‘We’re going to be winning in e-commerce, ‘” said Joseph Feldman, an analyst at Telsey Advisory Group to Bloomberg.
According to Recode, Jet.com founder and CEO Marc Lore is expected to lead Walmart’s U.S. online business and will report directly to Walmart CEO Doug McMillon. “Our customers will win”, he said.
Walmart President and Chief Executive Doug McMillon called the acquisition “another jolt of entrepreneurial spirit being injected into Wal-Mart”.
Wal-Mart is not valuing Jet.com exclusively based on traditional metrics such as profitability, which the startup does not have.
Lore’s bet was that online shopping will be such a large market that even coming in second place to Amazon would prove to be an incredible business opportunity.
According to Recode’s sources, Jet.com co-founder Marc Lore will continue to oversee the site’s operations and also take over the reins of Walmart’s online store.
While still not profitable and burning through advertising money at a rate of $20 million to $25 million per month to fund its growth, Jet has been adding more than 400,000 new shoppers each month and processes an average of 25,000 orders daily.
Jet says it has “set out to make shopping more transparent, more efficient, and at the same time, a little more fun”, according to its website. However, the giant retailer still far lags behind Amazon whose sale was $107 billion past year.
Walmart and Jet.com will maintain distinct brands.
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“Today, I couldn’t be more excited that we will be joining with Walmart to help fuel the realisation of that vision”. If all goes smoothly, Walmart said it expects to bring Jet into the fold by the end of the calendar year. Lore previously co-founded Diapers.com’s parent company and sold it to Amazon for $550 million in 2011.
