Eyeing the opportunity to grow its e-commerce sales, Walmart today announced it will shell out $ 3.3 billion to acquire the online retailer Jet. Since launching a year ago, Jet has grown rapidly to reach $ 1 billion in merchandise sales.
While Walmart dominates the brick-and-mortar retail ecosystem in the U.S., its online sales trail that of its greatest e-commerce competitor, Amazon. In 2015, Amazon reported net sales of $ 107 billion, while Walmart’s online sales came to $ 13.7 billion, compared to its total sales of $ 482 billion.
Expected to close later this year, Walmart’s acquisition of Jet includes transfers “over time” of $ 3 billion in cash and $ 300 million in Walmart shares. Walmart.com and Jet.com will continue to operate as distinct brands, with Jet keeping its focus on “a unique and differentiated customer experience with curated assortment,” according to today’s announcement.
Jet-Powered Growth
The acquisition of Jet is a “jolt of entrepreneurial spirit” that will help Walmart speed efforts to lower prices, expand product assortment and offer an easy shopping experience, Walmart president and CEO Doug McMillon said in a statement. “Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time.”
Launched in July 2015, the New Jersey-based Jet began as a members-only shopping club with an annual subscription fee of $ 49.99 but dropped that fee in October. The company uses a dynamic pricing algorithm that founder and CEO Marc Lore said gives customers “the ability to save money by placing bigger, smarter orders.”
Since its launch, Jet’s business has grown dramatically, adding more than 400,000 new customers every month and processing an average of 25,000 orders per day. It sells everything from groceries to electronics, offering more than 12 million products through more than 2,400 retail partners.
‘Furious’ Competition with Amazon
Earlier this year, the financial services firm Cowen and Company predicted that Amazon could grab a much greater share of retail sales in North America between now and 2018, while Walmart’s share would remain relatively unchanged. Walmart currently accounts for 10.6 percent of retail sales in the U.S., down from 11.6 percent in 2009. Amazon’s share, meanwhile, could grow from a little over 3 percent to around 7 percent by 2018, according to Cowen and Company.
“Walmart is spending furiously to fight back against Amazon’s online onslaught,” The Economist noted in June. “Last year it poured a staggering $ 10.5 billion into information technology, more than any other company on the planet,” the publication added, citing data from IDC.
Walmart said its acquisition of Jet will “build on and complement the significant foundation already in place to serve customers across the Walmart app, site and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.”
