Though Walmart is a giant in the brick-and-mortar retail space, Amazon is the clear king of eCommerce here in the States. In a bid to help close the gap, Walmart has announced it will buy shopping startup Jet.com for $3 billion in cash.
When Walmart acquires Jet.com, which is expected to pass regulatory approval later this year, they’re not just getting a year-old eCom site—but, more importantly, the talent behind the operation. Jet founder & CEO Marc Lore will take over Walmart’s own online sales, as well as continuing to manage Jet’s business for the company.
Jet’s business model is significantly different from Walmart’s, who works with distributors to buy in bulk at discounted prices. Instead, Jet offers incentives to the customer based on purchase volume, flipping the empowerment opportunity from the wholesaler to the consumer. The USA Today reports that Walmart’s own site will look to adopt this model itself down the road.
Lore & Jet.com also bring a more affluential audience to Walmart’s brand, with customers more likely to have an HHI greater than $150k. Millennials, the most coveted of demos for advertisers, also tend to be drawn more towards Jet than Walmart itself.
Walmart + Jet vs. Amazon
While the Walmart acquisition of Jet.com is being billed as a means to compete with Amazon, is it really? Probably not; in fact, this is more likely an example of Walmart PR at work than anyone’s true feelings regarding this purchase.
Per the WSJ, Amazon sold $107 billion in 2015; online, Walmart sold just $14 billion. Granted, Walmart is more than four times the size of Amazon offline—but, the takeover of a single, one-year-old niche eCom site won’t help Walmart close than online gap, monetarily at least.
What the Walmart purchase will help the company with is revitalizing their way of thinking when it comes to online sales. In the long run, this can be incredibly valuable for the traditionally retail brand, as the company struggles to keep up with younger audiences & diversified buying options.
In turn, Walmart helps Jet via its established vendor relationships. The eCom site has not reached profitability in its year-plus of operation.