Technology

Wal-Mart Lands Jet.com in E-Commerce Shift

Wal-Mart's $3 billion purchase of the startup is aimed at boosting an e-commerce operation that lags well behind industry leader Amazon.com.
Matthew HellerAugust 8, 2016

Wal-Mart said Monday it had agreed to acquire startup Jet.com for $3.3 billion, making a major pivot in an e-commerce strategy that has so far failed to excite customers and left it well behind online shopping leader Amazon.

Wal-Mart’s move is aimed at boosting an e-commerce operation that, despite billions of dollars in investment in building distribution centers and expanding services, ranks fourth in online shopping with a 3% market share, compared to Amazon’s 31%.

Jet.com, which was launched only a year ago, uses pricing software that calculates in real-time the most efficient way to fulfill a customer’s order and then passes those savings on to them.

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The deal is the largest-ever purchase of a U.S. e-commerce startup. It includes about $3 billion in cash and $300 million of Wal-Mart shares, which will be paid over time.

“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,” Wal-Mart CEO Doug McMillon.

“McMillon sees the shift to online shopping and the expansion of Amazon.com Inc. as existential threats to the company’s five decades of growth,” The Wall Street Journal said.

Analysts don’t expect Wal-Mart to catch up with Amazon but Charlie O’Shea of Moody’s told USA Today, “The key is to be number two. [Acquiring Jet] helps differentiate Walmart and give it a leg up on its brick-and-mortar brethren.”

Wal-Mart’s e-commerce sales last year reached nearly $14 billion, but sales rose just 7% in the most recent quarter. By acquiring Jet.com, “Wal-Mart is trying to short-circuit the [e-commerce] learning curve,” Britt Beemer, founder of America’s Research Group, told the Los Angeles Times.

Wal-Mart said Jet has been adding 400,000 shoppers monthly and at the end of its first year was on pace to sell $1 billion in merchandise annually.

“The acquisition of Jet will infuse Walmart with fresh ideas and expertise, as well as an attractive brand with proven appeal, especially with millennials,” Wal-Mart said.