After much speculation, Walmart is officially buying Jet dot com, an American e-commerce company that’s been renowned for its unique pricing scheme.
Wal-Mart is offering $3 billion along with $300 million of Walmart shares to Jet.com. It’s being called the largest e-commerce acquisition in history, as well as an effort to get ahead in the online retailing world.
For a while now, Amazon has been dominating the e-tailing space; just last year the online company made $107 billion in net revenue, growing 20.25% from last year. Meanwhile, store-based mass retailing companies like Wal-Mart have been making shaky progress in the online retail industry, just making $13.6 billion in comparison.
In this new partnership, however, Wal-Mart may finally be able to compete against Amazon. It will also be the second time CEO of Jet.com, Mark Lore, will be going up against Amazon.
In 2005, Lore founded 1800Diapers.com, an online retailing company that sold household essentials and baby products. The company eventually became part of an umbrella company called Quidsi that offered a whole variety of products through multiple websites. It was set to compete against Amazon but things didn’t go as planned. Amazon eventually bought Quidsi for $545 million.
After working for amazon for over two years, Lore founded Jet in 2014 with Nate Faust and Mike Hanrahan.
Jet quickly became a big player on the scene, reaching $1 billion in run-rate gross merchandise value in little over a year. It’s also attracted significant attention from urban and millennial customers. According to the site, the consumer base has been growing 400,000 a month with an average of 25,000 orders daily.
It’s pricing has differentiated itself from Amazon, boasting a system that encourages customers to buy in bulk with incentives like reduced shipping prices as well as discounts. This has made its products priced 10 %– 15% lower than other online retailers.
Wal-Mart intends to use this proprietary technology and consumer database to jumpstart its online presence and catch up to Amazon.
Wal-Mart has since done well when it comes to in-store operations, but with the help of New Jersey-based Jet, Wal-Mart now has the potential to expand further into digital commerce.
This has been part of a series of attempts from Wal-Mart to compete with Amazon. They’ve also hired thousands of workers, opened up two offices in Silicon Valley, have invested in large e-commerce distribution centers, and just recently, rolled out a subscription based service that’s cheaper than Amazon Prime.
In a public statement, Lore has expressed his delight to be working with Wal-Mart, a team that may actually size up against Amazon.
“We started Jet with the vision of creating a new shopping experience,” Lore said. “Today, I couldn’t be more excited that we will be joining with Walmart to fuel the realization of that vision. The combination of Walmart’s retail expertise, purchasing sale, 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.”
We’ve yet to see if this partnership will actually surmount Amazon’s foothold in the industry. In any case, Wal-Mart has a decent shot at increasing its online presence.
