Walmart got out of the gate early with the big announcement of the week, with the news that they will be acquiring Jet.com for $3.3 billion in cash and stock.
This deal will mark the biggest eCommerce buy in U.S. history and a sure sign that Walmart is not kidding around about maintaining its dominant retail position in the face of Amazon’s growing influence.
Marc Lore comes part and parcel with the deal. He will join Walmart as the firm’s top eCommerce executive, and he will replace Neil Ashe who joined Walmart in 2012.
The deal will be paid over time. The split will be $3 billion in cash and $300 million in Walmart stock. The transaction is expected to close by the end of 2016.
The deal dovetails with the billions Walmart has already spent on eCommerce upgrades, including the construction of seven new distribution centers, the hiring of additional staff in eCommerce operations and the rollout of such digitally enticing services like Walmart Pay.
The payout, however, has not been what Walmart wants to see. ECommerce sales reached about $14 billion, or 3 percent of its $482 billion in annual revenue. Amazon’s sales hit $107 billion last year, though that big figure includes Amazon’s web services business.
Jet brings its proprietary software that helps it sell at lower prices that factors customer choices against profitability of sale by factoring in shipping distance and basket size; that allows it to offer flexible discounting. What it lacks is the ability to build the billions in inventory and marketing it would need to really keep up with the Jones over at Amazon.
According to Walmart, Jet has been adding 400K shoppers per month, and reached a year one run-rate of $1 billion in merchandise.
“It’s another jolt of entrepreneurial spirit being injected into Walmart,” Walmart CEO Doug McMillon said in a press release Monday.
The company will continue to operate both Jet.com and Walmart.com as separate websites.
Walmart will likely incorporate Jet’s software into Walmart.com.
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