Walmart to buy Jet

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BENTONVILLE, Ark. — Walmart’s better-than-forecast second quarter results included signs that the company is making progress online, with e-commerce sales increasing 11.8%. But Walmart’s $3.3 billion purchase of the online retailer Inc. earlier this month shows that the giant retailer intends to take its battle with Inc. to a new level.

Walmart said the acquisition of Jet will build on and complement the e-commerce foundation that it already has in place with the Walmart app, site and stores while also expanding its customer reach and bringing in new capabilities.

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” Walmart president and chief executive officer Doug McMillon said in a statement. “We believe the acquisition of Jet accelerates our progress across these priorities. 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. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”

Plans call for Walmart and Jet to maintain distinct online brands, with focusing on the company’s everyday-low price strategy and Jet continuing to provide a “unique and differentiated customer experience with curated assortment,” Walmart said. Both retailers said they will leverage each other’s technology to develop new offerings for customers.

Jet has grown rapidly in the competitive online retail market, reaching $1 billion in run-rate gross merchandise value and offering 12 million SKUs in its first year. Jet’s customer base skews toward urbanites and Millennials, and the online retailer adds more than 400,000 new shoppers monthly and generates an average of 25,000 daily processed orders. Jet has also built an attractive product assortment from more than 2,400 retailer and brand partners, Walmart said, and its best-in-class technology rewards customers in real time with savings on items bought and shipped together, reining in supply chain and logistics costs often tied to the price of goods.

“We started Jet with the vision of creating a new shopping experience,” Jet cofounder and CEO Marc Lore stated. “Today, I couldn’t be more excited that we will be joining with Walmart to help fuel the realization of that vision. The combination of Walmart’s retail expertise, purchasing scale, sourcing capabilities, distribution footprint and digital assets — together with the team, technology and business we have built here at Jet — will allow us to deliver more value to customers.”

Walmart said the transaction already has been approved by both companies’ boards of directors and is expected to close this calendar year, pending regulatory approval.

The deal has gotten high marks from some industry observers.

“Walmart has struggled to convert their brick-and-mortar expertise to online sales, and acquiring Jet is a smart move for the company as they look to compete with Amazon’s e-commerce dominance,” commented Chris Taylor, founder and CEO of the Austin, Texas-based software as a service company Square Root. “Where the company’s “Everyday Low Prices” approach has made them a master at brick-and-mortar sales, the company has struggled to grow its e-commerce business. They have been adjusting their omnichannel strategy to keep up with consumers’ fluctuating shopping habits and the desire for a consistent shopping experience online and offline. Now, with the Jet acquisition, the company is set to make a much stronger e-commerce play and, moving into the holiday shopping season, this will have a huge impact on their seasonal sales both in stores and online.”

Taylor argued that the Jet acquisition also gives Walmart “some street cred” with younger, tech-savvy consumers.

“Bringing Jet on board now gives them direct access to that demographic,” Taylor said. “Will they have to fight to keep those customers? Of course. But retaining the Jet customer base will likely prove easier than acquiring those customers net-new.”

Walmart’s willingness to seek outside help in growing its e-commerce business was made evident earlier this summer when the company agreed to sell its Yihaodian e-commerce business in China to Inc., that country’s largest e-commerce retailer by revenue, as part of a strategic partnership between Walmart and that is meant to boost Walmart’s online sales and in-store traffic in China.



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