American multinational retail chain Walmart on Monday acquired Amazon’s rival Jet for $3 billion in cash, plus up to $300 million in shares for the founders. The deal is the largest ever purchase of a US e-commerce startup. Founded in 2014, Jet is an online-only shopping site that has raised $565 million in four rounds of funding from investors including Alibaba. The company will continue to operate both Jet.com and Walmart.com as separate websites. The biggest challenge will be bringing the two e-commerce operations toghther.
While Wal-Mart is one of the biggest U.S. e-commerce players, it has struggled to keep pace with Amazon.
Wal-Mart’s e-commerce sales rose just 7% in the most recent quarter, while the overall U.S. e-commerce market grew about 15%. In the most recent quarter Amazon grew 31%.
In recent months Wal-Mart has rapidly increased the number of products it sells online to lure shoppers from Amazon. But until earlier this year the technology behind Wal-Mart’s website capped the number of products it could display to shoppers at around 8 million, according to a spokesman.
Walmart.com now has about 11 million products and is growing quickly by giving more third-party sellers access to the site and encouraging manufactures who sell in Wal-Mart stores to upload information about all their products into Walmart.com.
Jet has said it aims to offer shoppers lower prices than Amazon or Wal-Mart by teaming up with a vast marketplace of sellers rather than building up its own inventory. Part of Jet’s pitch to shoppers is software that helps it sell at lower prices by taking into account how customer choices hit profits.
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 worth of merchandise annually through its website. A Wal-Mart spokesman declined to discuss Jet’s revenue or profitability.
The retailer gain’s access to a larger group of young, wealthy, urban shoppers through Jet, Jet has been able to attract some brands we don’t have at Wal-Mart. The Journal reported last week that Wal-Mart was in talks to buy the unprofitable startup, which launched last year and has been spending heavily to market itself. Wal-Mart said the transaction includes about $3 billion in cash and $300 million of Wal-Mart shares, which will be paid over time.
The deal marks a significant shift in how Wal-Mart approaches e-commerce. It first launched Walmart.com more than 15 years ago and has spent billions building up its own online operations. It has opened seven large-scale distribution centers in the U.S. to fulfill orders and hired hundreds of e-commerce staffers at offices in San Bruno, Calif.
Wal-Mart’s e-commerce sales last year reached nearly $14 billion, or 3% of its $482 billion in annual revenue. Amazon’s sales hit $107 billion last year, including its web-service business. A Wal-Mart and Jet.com tie-up could firmly make the e-commerce battle a two horse race. While Wal-Mart could benefit from Jet’s supply chain, talent and technology expertise said that the two companies operate with different models.
Wal-Mart Stores signed a $3.3 billion deal to buy web retailer Jet.com ,bringing in some outside help to jump-start growth at the retail giant’s e-commerce operations.
The deal is the largest ever purchase of a U.S. e-commerce startup and a sign Wal-Mart Chief Executive Doug McMillon sees the shift to online shopping and the expansion of Amazon.com. Jet’s 46-year-old founder Marc Lore will join Wal-Mart as CEO of e-commerce and will be responsible for both Walmart.com and Jet.com, Mr. McMillon said on Monday. Wal-Mart’s top online executive, Neil Ashe, is leaving the company.