Wal-Mart Stores announced Monday that it will acquire e-commerce company Jet.com for 3.3 billion as it beefs up its online retail operations in response to Amazon and other companies.
Advertisement
Wal-Mart dominates USA store-based retailing, with a 13% market share, though it ranks fourth in e-commerce, with 3%, Malison said.
It’ll be interesting to see if this helps Walmart take the fight to Amazon in the ecommerce space; it now makes only $14 billion a year through online sales, which is a pittance compared to Amazon’s annual revenue of $99 billion.
Jet.com is among the rapidly growing and innovative e-commerce companies in the United States led by co-founder and CEO Marc Lore along with fellow co-founders Mike Hanrahan and Nate Faust. Jet.com has more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders.
CNBC reports the deal is one of the largest acquisitions of an e-commerce company ever.
“Wal-Mart will gain significantly from Jet’s logistics and delivery expertise”, Michelle Malison, retail analyst for Euromonitor. Amazon.com holds 31% of the online shopping market, she said.
I purchased from Jet.com a few times to try it out.
Walmart and Jet.com will remain separate companies, but will co-operate over technology.
Financial advisors to Walmart on this transaction were Allen & Company and J.P. Morgan Securities LLC.
Wal-Mart says it also will incorporate some of Jet.com’s “smart” technology that lowers prices in real time by looking for ways to cut costs. Amazon’s US$99-a-year service provides free two-day shipping on millions of items, encouraging shoppers to stay on the website, as well as the company’s video entertainment offerings.
It appears that Wal-Mart is counting on Jet’s curated approach to product offerings to keep the millennials (and the rest of us) coming back for more. Wal-Mart and Jet.com each declined to comment on that. Under the terms of the deal, Jet cofounder and chief executive Marc Lore will remain at his post and will helm Walmart’s US ecommerce operations.
The Jet deal would be Wal-Mart’s biggest yet in a five-year e-commerce acquisition spree, as the world’s largest retailer tries to also be a dominant player online.
“We started Jet with the vision of creating a new shopping experience”, Lore said in the press release.
Ahead of Monday’s opening bell Wal-Mart’s stock is up about 0.7%, at $74.25 in a 52-week range of $56.30 to $74.35. He will only run Walmart and Jet’s e-commerce businesses.
Advertisement
While Amazon stock has skyrocketed over the last 10 years, Walmart stock has essentially moved sideways, with negligible returns to shareholders (excluding the dividend yield which is now around 2%).
