Walmart has officially made the biggest e-commerce purchase in history spending $3 billion on Jet.com. The move comes as Walmart gears up to take on online retail giant Amazon. The purchase is designed to bolster Walmart’s struggling online presence and push the company as a viable competitor for Amazon. The acquisition is slated to be formally announced on Monday.
— ChizComm (@ChizComm) August 7, 2016
The Daily Mail reports that Walmart just made the largest e-commerce acquisition in U.S. history with the purchase of Jet.com. The e-commerce startup was purchased for a staggering $3 billion and is designed to help increase Walmart’s presence online. The acquisition will also provide the retail giant with access to technology and supply-chain innovations that will help them compete with Amazon.
Wal-Mart sees an opportunity to bolster its e-commerce operations to take on rival Amazon. https://t.co/SxNe7N6uzO
— MarketWatch (@MarketWatch) August 8, 2016
While Walmart has a place as a major physical retailer ranking No. 1 with 13 percent market share, the company has been struggling with translating the business to the online world. In fact, Walmart ranks fourth in e-commerce with just 3 percent of the total market share. Michelle Malison, a retail analyst with Euromonitor International, spoke with the LA Times about the retailer’s problems noting that despite overall market growth for the e-commerce sector, Walmart’s online retail sales have continued to decline.
“Walmart’s e-commerce growth has been slow — they have had a year-over-year decline when the overall market is still growing. What Walmart has been doing for their e-commerce business is not resonating with consumers.”
Therefore, acquiring Jet.com can be exactly what Walmart needs to get its e-commerce segment growing. Britt Beemer, founder of America’s Research Group, points out that Walmart simply doesn’t want to waste any more time struggling with the e-commerce learning curve and is hoping to “short circuit” that curve by the Jet.com acquisition. In fact, it is noted that if the people at Jet.com can come in and help Walmart double their sales, the $3 billion price tag will be overshadowed by profits.
“Walmart is trying to short-circuit the learning curve by purchasing Jet.com. If these guys that come in can help Walmart double their Internet sales in one or two years, whatever the acquisition costs are, are minimal in comparison to what they’ll make in profits.”
So is Jet.com worth the $3 billion price tag? Company records indicate that Jet.com is on track for a 28 percent sales growth month over month and $1 billion in sales. The company also boasts 4 million shoppers on the website. Therefore, it seems that Walmart will hone in on these impressive startup figures and remodel Walmart’s previously lackluster e-commerce presence with the help of the Jet.com purchase.
— Jamil and Nate (@Brotherspodcast) August 8, 2016
However, it isn’t just Walmart that will be benefiting from the acquisition. Jet.com has raised $500 million in venture capital but knows that is nowhere near enough to compete with Amazon. Therefore, the financial contribution by Walmart’s acquisition can ensure Jet.com has what it needs to be a viable competitor. One of the big selling points of Amazon is the Prime shopping experience with inexpensive (or sometimes free) two-day shipping and overnight options. With Walmart and Jet.com combined, the startup with have the funding needed to truly compete with Amazon as Jet.com brings the e-commerce know-how and Walmart brings the financing.
What do you think about Walmart acquiring Jet.com for a staggering $3 billion? Will the purchase payoff for Walmart by increasing their struggling e-commerce segment?