Would Walmart + Jet.com be an Amazon killer?
Walmart is in talks to buy Jet.com, according to The Wall Street Journal and other sources. The report has raised the question as to whether a union between the world’s largest retailer and the heavily-backed e-tail startup would prove an equal e-commerce match to Amazon.com.
The move by Walmart, should it prove true, speaks to both great opportunity and risk for the retailer.
The opportunity lies in the prospect of future retailing greatness for Jet, which is run by CEO Marc Lore who co-founded Quidsi (Diapers.com, Soap.com, etc.) only to sell it to Amazon for over $500 million in 2010.
Jet launched last year initially with the idea it would charge an annual subscription fee like Costco while promising low prices to its members. The annual fee was scrapped less than six months in as Jet sought to draw more shoppers to the site. Jet has remained true, research has suggested, to its low price mantra with retails that undercut both Amazon and Walmart. Much of its pricing power has come from the over $500 million in investments Mr. Lore has been able to attract from banks, mutual and capital venture funds.
The acquisition of Jet could potentially help Walmart reach new consumers and hasten growth in some product categories, according to data from Slice Intelligence’s panel of over four million online shoppers. According to its data analysis, Slice has found that Walmart.com’s customers tend to be more female, slightly older and less educated than Jet’s shoppers. While both companies are strong in online sales of electronics and the home & kitchen categories, a higher proportion of Jet’s sales come from grocery and health and beauty product sales than Walmart.
On the risk side, Jet is a long way from turning a profit. Much like the Amazon model, Jet has been primarily focused on gaining customers while being less concerned about profits. It has even sold goods purchased from other retailers at a loss to satisfy customers. Jet, according to the Journal, could be valued at up to $3 billion. As a point of comparison, Walmart paid $2.3 billion to acquire South Africa’s Massmart in 2010.
- Wal-Mart In Talks to Buy Web Retailer Jet.com – The Wall Street Journal (sub. required)
- Why it makes sense for Walmart to buy Jet.com – even for $3 billion – Recode
- Jet.com – how will it land? – Slice Intelligence
- Jet.com looks to disrupt online retailing – RetailWire
- Jet.com beats Amazon and Walmart on price – RetailWire
- Jet.com ditches subscription fee – RetailWire
- Will Jet.com’s online fresh grocery pilot crash or soar? – RetailWire
- Amazon buys rival. What’s next? – RetailWire
DISCUSSION QUESTIONS: Does a Walmart acquisition of Jet.com make business sense? Do you think Walmart would seek to integrate Jet.com into Walmart.com or continue to run them as separate entities? How would Jet.com work with Walmart’s physical store locations?