Ask @RetailPhil: What the Jet.com Acquisition Means for Walmart
In early August, Walmart announced it was to acquire Jet.com for a staggering $3 billion cash and $300 million in shares. We’re almost at month out (!!!) from the news hitting our front steps, and we’re still feeling the aftermath. But what does all this mean for the retail industry? Let’s dig a bit deeper.
E-commerce has long been the great equalizer for small brands and retailers when competing with the big guys. Small craft businesses like yours have spent a great deal of time building their own strategies and attempting to shift behaviour based on their bricks and mortar experience (See personal shopping apps, Instagram contests and electronic wallets).
Some the retail giants, like Target and Walmart, have made small gains in this category (about 3% of Walmart’s total sales are conducted online), but for the most part have lagged relatively behind the smaller guys. Regardless, ecommerce in the United States has been growing steadily, accounting for 10.6% of 2015 of total retail sales, and they’re going to have to keep pace or face a potentially grim outcome.
Walmart has spent a lot of time being the number one retailer in the world, and is currently the second biggest e-commerce retailer in the United States. But even so, it trails industry leader Amazon, who rakes in $82.8 Billion annually online, by a significant margin. There are a bunch of reasons for this – Amazon started online, for one – but more importantly, Amazon lists three times the amount of products online. So, it’s simple:
[tweet_this] Buying Jet.com is about acquiring the expertise they need to be able to reach online customers to keep up with Amazon. [/tweet_this]
If you’re not catching on quick enough… buy the know-how, right? Maybe if you’re a multi-billion dollar company.
But this is far from a match made in heaven, and there are still a lot of moving parts that Walmart has to get straight for this to work. Jet.com was losing money when they were acquired by Walmart… will Walmart find a way to turn incorporate Jet.com and make money? How long are they willing to sustain a losing model?
Stay tuned to find out!