In many ways Walmart is the offline version of Amazon, the one-stop shop for everyone from car parts and baby diapers to groceries and toothpaste. Now in an effort to significantly bolster its online presence and become Amazon's primary web competitor, Walmart has entered into a definitive agreement to acquire Jet.com, a fast growing e-commerce portal, for $3 billion in cash plus another $300 million in Walmart shares to be paid over time, Walmart confirmed today.
Walmart already conducts business online but not on the same scale as Amazon. The acquisition of Jet.com will build on and complement Walmart's online shopping foundation and spur faster e-commerce growth by expanding customer reach and adding new capabilities. It's a $3 billion gamble, though even if Walmart ultimately comes in second to Amazon, that will still be a good place to be, financially speaking.
"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," said Doug McMillon, president and CEO, Wal-Mart Stores, Inc. "We believe the acquisition of Jet accelerates our progress across these priorities."
The plan for now is to maintain distinct brands for Walmart and Jet.com, with each business benefiting from what the other brings to the table. For Walmart, that means utilizing Jet.com's ordering capabilities to grow its online business at a faster rate, while Jet.com gets access to Walmart's extensive resources and supplier relationships.
"We started Jet with the vision of creating a new shopping experience," Jet.com CEO and co-founder Marc Lore said. "Today, I couldn’t be more excited that we will be joining with Walmart to help fuel the realization of that vision. The combination of Walmart’s retail expertise, purchasing scale, 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."
Lore's expertise is something Walmart can greatly benefit from in its attempt to take on Amazon. The 45-year-old also co-founded Quidsi, parent company to Diapers.com and Soap.com, that he sold to Amazon for $545 million in 2010. Under Lore's leadership, Jet.com reached $1 billion in run-rate Gross Merchandise Value (GMV) and 12 million SKUs in its first year. It's particularly popular among urban and millennial customers.
The deal to acquire Jet.com must pass regulatory approval, which Walmart believes won't be a problem.