Walmart Set To Snatch Up Jet.com

Acquisition marks the departure from “third way” strategies.

Walmart is reportedly in talks to acquire online discount retailer Jet.com, The Wall Street Journal reported, a sale that might mark a departure from traditional strategies.  While representatives from both sides declined to comment on the matter, the discussions are a significant sign that Amazon is a tough competitor to take down in the $350 billion e-commerce market, according to the New York Times.

While Jet.com sought to topple Amazon as the online leader, the company struggled, with company founder Marc Lore predicting in a mid-2015 interview that it would take at least five years for the company to stop losing money on every shipment.  Then in October, Jet.com eliminated its membership fee to “enable even more people to embrace this new way of shopping,” and give Amazon a run for its money. The company still struggled.

Now Walmart could benefit from the acquisition of Jet.com as a way to reproduce its offline dominance in the online world. Recently, Walmart has focused on its digital offerings and the expansion of its e-commerce business. Retail analyst Neil Saunders told the New York Times that Jet’s model of encouraging bulk buying would help Walmart boost areas that it has previously faltered. Walmart introduced its “Shipping Pass,” an invitation-only $50 per year subscription that gives members free three day shipping to directly challenge Amazon.

Rick Chavie, CEO of  EnterWorks, believes that in Walmart’s battle to be relevant in ecommerce, this potential acquisition of Jet.com is one in a series of attempts to compete with Amazon while also finding a “third way” that seeks to embed a software firm within a traditional retailer by acquiring niche web technologies in social, analytics, and web infrastructure.

“What is unique about this acquisition is the departure from that “third way” strategy in buying a full-on ecommerce retailer that has shown the industry how to ramp up a customer base rapidly,” notes Chavie.  “In contrast to Walmart’s declining share of ecommerce business – Walmart’s web business grew 7% in the first quarter compared to 15% growth in the industry – Jet.com has reached an annualized run rate of $1 billion in just one year since its launch in July 2015.   Such a potential acquisition is not surprising given Walmart CEO’s admission of disappointment in the ongoing decline in their ecommerce growth rate after Amazon posted 32% growth in the first quarter.”