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Wal-Mart gives Jet shoppers a taste of its house brands

February 22, 2017 02:31 PM
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(Bloomberg)—The brand-conscious millennial shoppers who form the core of Jet.com’s customer base might find something unusual on the site this month: stodgy-yet-reliable store brands from Jet’s new owner, Wal-Mart Stores Inc.

Online marketplace Jet.com has started offering Wal-Mart’s in-house brands including Great Value, Equate and Sam’s Choice now that the companies’ online order-fulfillment centers have been linked up, a spokesman confirmed Tuesday. The move represents a small but significant step toward integrating last year’s $3.3 billion acquisition of Jet.com, part of a push to challenge Amazon.com Inc. in e-commerce. Amazon is No. 1 in the Internet Retailer 2016 Top 500 Guide; Wal-Mart is No. 4.

Walmart.com and Jet.com will continue to operate separate sites and target different customer groups—Walmart.com for the everyday, price-conscious shopper and Jet for more upscale city dwellers, a spokesman says. Yet in certain cases, “where there are gaps in the assortment,” Jet.com will offer the Wal-Mart store brands. One example would be Great Value organic foods, he says.

“Because we’ve linked our fulfillment centers now, you can effectively put any private brand on Jet if it makes sense,” he says.

The development comes as Wal-Mart’s U.S. online revenue rose by double digits for the third straight quarter, helping results over the holiday period beat analysts’ estimates. The online unit’s so-called gross merchandise value, which includes sales made by third parties on its marketplace site, increased 36% in the period ended Jan. 31. Wal-Mart now offers 35 million items on marketplace, a quadrupling from a year ago.

Growing portfolio

“We’re happy about how fast we’re moving but still have a lot of work to do,” Jet.com co-founder Marc Lore, now head of Wal-Mart’s online operations, said on a call with reporters Tuesday. Last week, the company acquired U.S. outdoor e-retailer Moosejaw (No. 261 in the Top 500).

Still, e-commerce accounts for only about 3% of Wal-Mart’s total revenue, compared with 11% for the retail industry as a whole, according to Sanford C. Bernstein & Co.

“Wal-Mart has struggled to differentiate against Amazon.com and a host of emerging online threats,” Wells Fargo & Co. analyst Zachary Fadem said.

Wal-Mart’s store brands might help. They span a slew of categories, including food, beverage, and health and beauty. They’re typically priced below national brands such as those made by Nestle SA and Procter & Gamble Co., but their profit margins benefit from not requiring any advertising. Wal-Mart’s Ol’ Roy dog food was the first in-store brand, released in the 1980s.

Shoppers sometimes view store brands as independent brands, as evidenced by this observation in Wal-Mart’s 2000 annual report: “The products are so popular, in fact, that suppliers get letters from customers asking why they can’t buy Equate products at other retail chains.” Ol’ Roy—named after founder Sam Walton’s bird dog—has generated more annual revenue than Nestle’s Purina brand, and Great Value bleach outsells Clorox’s offering in some stores.

 

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