Why Walmart Bought Jet.com

After a week of speculation, it has been officially announced that Walmart will acquire innovative ecommerce company #JetCom, for which it will pay $3 billion in cash. It’s a sweet deal for Jet, and could in the future provide some possible healthy competition for Amazon, which may be what attracted Walmart to the online-only store in the first place. (c) Can Stock Photo

“Their [Walmart’s] online percentage of sales is pretty anemic and their ecommerce growth is slowing down,” said James Wester, research director for IDC Financial Insights. “An investment in Jet would aim to address that.” Wester added that the acquisition also gives Walmart the opportunity to leverage its offline presence against Amazon, combining the resources of its thousands of stores with the ease of ecommerce platform.

A site that’s been live for a little over a year at this point, Jet certainly provides the opportunity for Walmart to expand its presence in the ecommerce sector. As of now, Jet.Com boasts an average of 25,000 daily processed orders of items offered by over 2,400 retailers and brands.

Jet customers can see the price of their goods drop in realtime, a feat the company manages through sharing the cost of items bought and shipped together, offering discounts for opting out of free returns and using debit cards, and cutting costs in supply chain and logistics where other ecommerce services can’t.

It remains to be seen whether combining Jet’s nimble online service with Walmart’s monolith offline retail presence—currently, Walmart has around 11,527 stores in 28 countries if one counts all of its brands—will be enough to woo customers of Amazon, whose Prime service works out to less than a Netflix subscription per month, currently, and ships items in two business days.

There is no word yet as to how — or even if — Walmart Pay, the retail giant’s own mobile payments system, will operate within Jet.com.

Jet.com also boasts a thriving customer base particularly popular with millennial users, reportedly adding more than 400,000 new shoppers per month. As well as these advantages, Walmart’s online division is also gaining CEO Marc Lore, an ecommerce veteran. The former co-founder of Quidsi (which gave us Diaper.com, sold to Amazon for $550 million) and Jet.Com will head up both Walmart and Jet.com, which will remain an independent brand, at least for now.

“What Walmart gains is a world-class ecommerce team that can go head to head with Amazon, now with the resources of Walmart, and can theoretically propel Walmart into being one of the most innovative retailers in the world,” said Sucharita Mulpuru-Kodali, vice president and principal analyst at Forrester Research regarding Jet’s allure. “This is an acquisition that can be as fruitful as eBay’s early acquisition of PayPal or it can go the way of Skype. Whether Mark Lore feels empowered, has the budget, has the resources and has the drive to transform Walmart, will be the determining factors of whether this turns into PayPal or Skype.”

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