It's a battle of giants. One is the undisputed king of brick-and-mortar retail, and the other is the best that e-commerce has to offer. Walmart and Amazon have been competing for years to get a larger share of dollars from customers looking for everything from electronics to clothing to food, but for the most part, they have not invaded each other's primary retail channels. Until now.
Walmart agreed to acquire Jet.com, one of the fastest-growing e-commerce companies in the U.S. It paid $3 billion in cash, with an additional $300 million in Walmart shares, to complete the transaction. According to Walmart president and CEO Doug McMillon:
“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.... We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com 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.”
The move gives Walmart a direct avenue to challenge Amazon's online supremacy. Although Jet.com will maintain a distinct brand identity separate from Walmart, it's expected that the acquisition will influence the future of Walmart's app, site and stores. It could also position it for faster e-commerce growth by adopting Jet's customer base and appropriating some of its features which could be relevant to Walmart shoppers.
Although the company still requires regulatory approval, this purchase by Walmart figures to place the pressure on Amazon. According to the Miami Herald:
"Buying Jet.com will help Wal-Mart grab a higher-income customer who typically is younger. Jet.com has more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders. Wal-Mart says that it will also be incorporating some of Jet.com's "smart" technology that lowers prices in real time by looking for ways to cut costs. For Jet.com, which has been pouring money into splashy TV ads and other marketing, it will provide big financial backing."
What do you think of the deal? Will Amazon make a move into the brick-and-mortar segment in response?
Chris is a business writer and market analyst that focuses on the Markets, Legal and Washington sections of the Food Institute Report. In addition, he assists in compiling data for various Food Institute publications throughout the year. He invites you to contact him via email at firstname.lastname@example.org to talk about anything food-related.
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