News

Is Wal-Mart about to buy Jet.com?

August 3, 2016 02:24 PM
http://www.internetretailer.com/static/uploads/thumbs/Jet_Twitter_400x400_png_78x78_crop_q95.jpg

Wal-Mart Stores Inc. may be on the verge of acquiring online marketplace Jet.com for an undisclosed price.

Neither Wal-Mart nor Jet is saying anything about the possible deal, but the Wall Street Journal and Bloomberg News are reporting that “people familiar with the matter” say Wal-Mart is in discussions to buy Jet. Wal-Mart is No. 4 in the Internet Retailer 2016 Top 500 Guide, and Jet was launched 13 months ago amid heavy hype as a potential competitor to Amazon.com Inc. (No. 1). A Wal-Mart spokeswoman declined comment. Jet.com representatives did not return multiple requests for comment.

Jet, which last month celebrated its first anniversary, has raised $565 million across four rounds of funding, according to CrunchBase. Chief revenue officer Scott Hilton told Internet Retailer last month that Jet sold $1 billion in gross merchandise value in its first 10 months and now has more than 4 million customers. The company isn’t releasing sales projections for 2016 or a monthly or quarterly growth rate.

Part of the reason for Wal-Mart’s interest in Jet could be that Jet’s growth far outpaces its own.

Data from e-commerce analytics provider Slice Intelligence shows that in July, Jet’s sales grew by 168% compared to August 2015. During that same time period, Wal-Mart’s online sales grew by 30%, not counting the holiday season.

“Wal-Mart has been experiencing significant slowing in its online growth,” says Fahim Naim, an Amazon alum and the founder of e-commerce consulting firm eShopportunity. “Sales growth has slowed for the past five quarters, and has trailed the economy wide e-commerce growth rate for nearly a year. While this potential acquisition could result as one of Wal-Mart's biggest acquisitions ever, Wal-Mart has trialed a variety of initiatives recently to accelerate its e-commerce growth and the acquisition of Jet may be its best bet yet.”

Other industry experts say they’re not surprised that Wal-Mart has interest in Jet, especially given how Wal-Mart is trying to compete for online market share with Amazon. Internet Retailer data shows that Amazon has grown its total market share of U.S. e-commerce to 33% as of 2015, up from 25% in 2012.

“It makes a lot of sense,” said Traci Gregorski, senior vice president of marketing at Market Track. “Expansion of potential buyers in the online space is important for [Wal-Mart]. The delivery that Jet has and the ease of checkout, those types of technologies are definitely sought after,” she says.  

“Jet offers Wal-Mart great talent, deep competitive insight into Amazon's operating model, a potentially new customer base—they've aggressively targeted shoppers in large urban metros—an emerging third-party marketplace platform and above-market growth rates,” says Keith Anderson, vice president of strategy and insights at price monitoring firm Profitero. “Even combined, this doesn't put Wal-Mart on even footing [with Amazon] overnight. But it does have the potential to accelerate Wal-Mart's growth online, and Wal-Mart is under pressure to do something bold.”

Wal-Mart CEO Doug McMillon appeared to acknowledge the need for boldness during Wal-Mart’s fiscal Q1 2017 earnings call in May. McMillon told analysts that global e-commerce sales grew 7% year over year during the quarter, a figure that left him dissatisfied. By comparison, total e-commerce sales in the U.S. grew 15.1% in Q1, according to the Commerce Department.

“The U.S. number is better than the global number, but neither is as high as we would like,” he told analysts on the call, according to a transcript from Seeking Alpha. “We can see progress against several of the necessary capabilities we need to win in e-commerce, but we're still working on a few others. We need them all to come together to see stronger growth.”

Industry experts say Wal-Mart buying Jet makes sense, but that doesn’t necessarily mean it will be a smooth transition or reap instant benefits.

The cornerstone of Jet.com’s value proposition has been its Smart Cart, which allows shoppers to get lower prices on certain items by either foregoing the ability to return a product or simply buying more of that product, a feature that Wal-Mart does not offer on its website.

“How willing would Wal-Mart be to preserve Jet's "Smart Cart" pricing mechanic?” Anderson says. “It has been a pillar of Jet's strategy and price positioning.”

Naim says while the move makes sense for Wal-Mart, that doesn’t necessarily mean that the combined Wal-Mart/Jet company will pose a formidable challenge to Amazon.

“Even if there were no overlap in product offerings between Jet and Walmart.com, Amazon would still have 10-15x more products for sale than the combined entity,” he says. “Wal-Mart's online sales are a fraction of Amazon's, and Amazon has over 20x more items listed for sale than Walmart.com. The writing was on the walls for the acquisition of Jet in order for Wal-Mart to better compete in the online space.”

In Internet Retailer’s newly released “Online Marketplaces: The shopping mall of the future” report, you can read more about Jet.com and Walmart’s growing focus on its online marketplace. The report provides an in-depth analysis of how merchants are growing on marketplaces, which ones they’re selling on, key details of some of the largest marketplaces in the U.S. and what they’re doing to keep up with Amazon.

 

Back

 

Top Solution Providers

close