The Wall Street Journal reports that Walmart "is in talks to buy online discount retailer Jet.com Inc., according to people familiar with the matter, escalating its costly quest to compete head-on with Amazon," though Bloomberg has been cautioning that the deal could end up just being a $100 million investment in Jet by Walmart.
A deal, the Journal writes, "could give Wal-Mart’s e-commerce efforts a much-needed jolt as the world’s largest retailer seeks to grow beyond its brick-and-mortar storefronts with speedy home delivery from a network of massive suburban warehouses."
The story notes that Walmart "has pledged $2 billion to boost e-commerce sales, building new fulfillment centers and supporting a two-day free shipping service that targets Amazon’s popular Prime service. It has also tried to goose sales with local grocery delivery and curbside pickup services. But online growth has slowed for nine straight quarters."
Meanwhile, Jet has had its own growing pains. While it was launched with more than $500 million in investment capital and has been valued at more than a billion dollars, the one year it has been in business has been marked by some significant strategy shifts - like eliminating that $50 annual membership it first instituted - and discounts that were not always as steep as originally projected.
Jet was launched by Mark Lore, who earlier in his career created diapers.com and its parent company Quidsi, which he sold to Amazon for $550 million in 2010.
The Journal writes that "for both Jet and Wal-Mart, Amazon’s frenzy of warehouse construction and fast delivery—as quickly as one-hour—have proved formidable. The Seattle -based online retailer has logged three straight quarters of record profit while locking in an estimated 60 million members to its $99-per-year Prime service, cultivating a loyal customer base and giving consumers fewer reasons to shop at traditional stores."
A deal, the Journal writes, "could give Wal-Mart’s e-commerce efforts a much-needed jolt as the world’s largest retailer seeks to grow beyond its brick-and-mortar storefronts with speedy home delivery from a network of massive suburban warehouses."
The story notes that Walmart "has pledged $2 billion to boost e-commerce sales, building new fulfillment centers and supporting a two-day free shipping service that targets Amazon’s popular Prime service. It has also tried to goose sales with local grocery delivery and curbside pickup services. But online growth has slowed for nine straight quarters."
Meanwhile, Jet has had its own growing pains. While it was launched with more than $500 million in investment capital and has been valued at more than a billion dollars, the one year it has been in business has been marked by some significant strategy shifts - like eliminating that $50 annual membership it first instituted - and discounts that were not always as steep as originally projected.
Jet was launched by Mark Lore, who earlier in his career created diapers.com and its parent company Quidsi, which he sold to Amazon for $550 million in 2010.
The Journal writes that "for both Jet and Wal-Mart, Amazon’s frenzy of warehouse construction and fast delivery—as quickly as one-hour—have proved formidable. The Seattle -based online retailer has logged three straight quarters of record profit while locking in an estimated 60 million members to its $99-per-year Prime service, cultivating a loyal customer base and giving consumers fewer reasons to shop at traditional stores."
- KC's View:
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I had a chance to chat with Tom Furphy - my partner in "The Innovation Conversation" - about this, and we both agreed that in many ways, this says more about Walmart's troubled e-commerce platform than it does about Jet. Walmart simply has been unable to get traction in e-commerce, which is why some sort of deal makes sense ... though it remains to be seen how Jet's branding - or Walmart's online branding - might be affected by a deal.
There are two major things that Walmart would get in a deal. One is Jet's online algorithm package, which encourages consumers to load up their shopping carts and getting bigger discounts with bigger basket sizes. (This is different from Amazon's approach, which uses Prime to encourage frequent transactions in which the size of the purchase is irrelevant.) And the other is Jet's marketplace business - no small advantage, since Jet has been more successful in getting other retailers to use its platform to make their own online sales. (Buy from Jet, and you may get a delivery from another retailer. it is similar to Amazon's approach to the business, though from my experience, I think Jet is less transparent about it.)
Three billion dollars is a lot of money, and I am not persuaded that the act of putting two less-than-successful e-commerce businesses together is the best way to compete with e-commerce leader Amazon. What I do know is that if this deal goes through, it will be like Groundhog Day for Lore and his early investors, who also did pretty well when they sold their earlier business to Amazon. I guess we'll have to wait another half-dozen years or so to find out if he builds another e-commerce platform and then sells it to Google.
The more I think about Walmart's e-business model, the more I have to wonder if it is not taking advantage to the greatest extent possible the biggest advantage it has - tons of stores in close proximity to its customers. That's something Amazon doesn't have, and yet it seems sometimes that Walmart wants to be Amazon rather than just the best Walmart.com it can be.
