Blogs

Jet.com’s discontinuation from Walmart

 

 

  • Overview of the acquisition of Jet.com by Walmart in 2016.
  • Insight of the e-commerce model developed by Jet.com to compete with rival Amazon.
  • Impact of the acquisition of Jet.com to overall e-commerce business of Walmart.

 

Walmart acquired Jet.com in 2016 to utilize the expertise of rising e-commerce company Jet.com. Whether it was a strategic investment by Walmart or a bid to compete with its rival Amazon in the US market, the four year association is now coming to an end with Jet.com being gradually phased out of operations as announced by Walmart’s management alongside their Q1 2021 results report. Jet.com, an online grocery start-up, founded in 2015 by e-commerce pioneer Marc Lore faired aggressively well in the online retail market in the US until it was taken over by Walmart for US$ 3 billion in 2016. The bid was likely an effort to challenge the Amazon’s dominance in the e-commerce market through synergies on employee talent, logistic operations and access to a broader e-commerce customer base. Jet.com’s e-commerce model which was mostly consumer centric was likened to Amazon with the offering of variety of innovative deals and incentives.

The acquisition accelerated the e-commerce business for Walmart with the company establishing its footprints in online market by subsuming various other digital consumer brands like Shoes.com, Moosejaw, Bamboos, etc. The association with Jet.com facilitated the omni-channel strategy for Walmart, providing the customers with better online shopping experience together with brick-and mortar stores where Walmart is already the leader. The omni-channel strategy integrated the retail stores and e-commerce business of Walmart through services such as "Walmart Pickup," "Pickup Today", "Grocery Pickup", "Grocery Delivery," and "Endless Aisle." Efficient logistics and broader customer base paid rich dividend to the company designated by constant surge in e-commerce revenue as also depicted in the chart below. E-commerce sales doubled between FY 2018 and FY 2020 (Year ending Jan 31st) for Walmart, one year after Marc Lore took over as the CEO of the e-commerce segment of US operations. The e-commerce sales of Walmart in America shot up by 74% in the first quarter of 2020 led by surge in online customers who resorted to online services amidst the global pandemic. 

 

     

 

The decision to discontinue Jet.com from Walmart reverberated from a series of events of restructuring that had already started in June last year from fully integrating Jet’s workforce into its own, relaunching the services by discarding  various Jet’s services like ‘Jet Black’, a personal shopping service and streamlining the logistics solution and customer base into its own brand. Walmart has since the acquisition of Jet.com not only established a firm grip over the pick-up and delivery services, but also accelerated Walmart.com’s non-food e-commerce growth under the eminent expertise of Marc Lore and the entire Jet team. Since the acquisition of Jet.com the number of stores in the US offering online grocery pickup also nearly doubled in 2018 to more than 1,100 locations from around 600 locations in 2017. It was only after the acquisition of Jet.com in 2016, the online website Walmart.com gained prominance in 2017 with various strategies such as free two-day shipping on more than 2 million items and the creation of Store N°, a tech incubator with a focus to drive e-commerce forward. The data below depicts how with the augmentation of e-commerce business since 2016, the number of stores offering online grocery pickup rose in the US for Walmart.

 

        

With all the reshuffling and restructuring of Jet.com, the standalone website has been loosing its prominence. SimilarWeb, a data website analytics firm reported the enormous fall in the number of visitors to Jet website in the peak Christmas shopping season during December 2019 to just 1.4 million visitors. The decline was almost 83% less as compared to the number of visitors Jet website had during the same period last year, and nearly 96% below the number of visitors it enticed during the year when Walmart acquired the company. On the other side, Walmart has seen a steady traction in its visitors since 2017, a year after it acquired Jet.com. As seen from the table below, the e-commerce sales for Walmart has been rising post its acquisition of Jet.com. With the advent into the e-commerce segment, the company has constantly been establishing its footprint and has emerged as the second largest e-commerce entity in US, though trailing way behind Amazon.

 

 

No doubt the acquisition of Jet.com was an expensive bet for Walmart in terms of outflow, much like the US$ 16 billion acquisition of Flipkart in 2018. But, tapping the expertise and intellect of Marc Lore into Walmart’s team has undoubtedly bore results for the e-commerce segment of Walmart.com. Although an expensive deal back in 2016, but today even though it is discontinuing Jet.com from its operation, the overall impact of the acquisition did not go waste as the company found its way into the e-commerce market only after it acquired Jet.com. Going forward, we can expect Walmart’s e-commerce segment to further establish its footprint both in US and international market.

Your Rating

Slack set out to kill E-mail

Started as a side project for internal use in a gaming company High revenue growth with recurring revenues Went Public by offering shares through the Direct Public Offering ...

Will the Big Bang merger drive, of Indian Public Sector banks, provide the required impetus to the slowing economy?

India’s Government announces plans to merge 10 of the country’s public sector banks Probable impact of the mergers   India’s Finance Minister, Nirmala Sitharaman,...

Is Mothercare on the verge of collapse?

History of Mothercare What went wrong? Company moved into administration   Mothercare, an iconic brand for babies, children and parents to be, went into...

Tire manufacturing industry, analysing the cost and margin trends

The global market for tire manufacturing stands at $180 billion. Michelin anticipates the long-term demand to rise at the rate of 5 to 10% a year in developing markets and 1 to 2% a year in mature...

Rapidly growing Indian online food delivery industry and its unrealised profits

Evolution of online food delivery industry in India Geographical penetration and scope for expansion Key players and their zeal to balance revenue and costs   Online...