Walmart’s acquisition of Jet: The winners and losers
It’s official: After days of speculation, Walmart has officially announced its acquisition of online retailer Jet, completing the biggest deal in U.S. e-commerce startup history. The deal values Jet at $3 billion, with Jet receiving $300 million in Walmart shares over time, in addition to bonuses for Jet executives.
“E-commerce is a must-win category and while we have been moving quickly, this enables us to do it even better,” a Walmart spokesperson told Digiday.
With online sales of $14 billion — compared to Amazon’s sales and services revenue of $99 billion last year — Walmart has long road ahead online. Here are the clearest winners and losers of the deal:
The deal is a clear win for Jet’s investors. Since its founding, Jet has secured more than $800 million in financing from a range of investors, including Accel Partners, Bain Capital Ventures and Fidelity Investments among others. But Jet’s prospects somewhat dimmed when it scrapped a membership model last fall and bet heavily on attracting customers based on the lowest prices. While it has added 400,000 new shoppers monthly, it hasn’t been as successful in retaining them.
“It was unlikely that Jet was going to be a huge standalone success,” said Jason Goldberg, svp of commerce and content practice at Razorfish. “So this is a sweet deal for them.”
While Walmart has a vast store and warehouse footprint, it has struggled to optimize shipping costs and delivery speeds. Meanwhile Jet, with its real-time pricing technology has been able to efficiently route orders to vendors based on the lowest fulfillment and shipping costs. It’s the perfect match, with Jet’s technology giving Walmart a lift and Jet getting access to Walmart’s huge assortment of vendors. Both ways, shoppers win.
“Consumers are the biggest winners no matter what,” said Sucharita Mulpuru, retail analyst at Forrester. “Walmart might see this as an opportunity to be more aggressive in terms of new features from a promotional and price value standpoint, and Jet could have a physical presence integrated within Walmart stores enhancing delivery options.”
Marc Lore is no stranger to online retail. He founded Quidsi, the parent of Diapers.com and Soap.com, before selling it to Amazon in 2010 for $545 million. This time, he and his Jet co-founders, former Amazon employees Mike Hanrahan and Nate Faust, seem to have done it again. With a 25 percent stake in Jet’s ownership according to Recode, Lore stands to make as much as $750 million in the deal.
With a hefty $3 billion plus price tag, today’s news marks the largest-ever acquisition of an e-commerce startup, according to venture-capital research firm CB Insights. Coupled with Unilever’s recent acquisition of Dollar Shave Club, it suggests the climate might be a good one for successful startups.
“This is one more example that justifies the theme of large, traditional retailers acquiring startups,” said Mulpuru. “Whether it is Target acquiring DermStore or Nordstrom acquiring Trunk Club.”
Jet was co-founded in 2014 by Lore with an aim to provide shoppers an online alternative to the likes of Amazon, Walmart and Costco. With Walmart now absorbing the so-called “Amazon-killer,” Target and Costco may be feeling the heat.
“It puts pressure on other big box retailers and their approach to innovation,” said Mulpuru. “At least Walmart made a bet, even though it may not be the right one.”
Goldberg agreed. “Everyone in the industry was in a way eagerly rooting for Jet as a foil for Amazon,” he said. “Now they better pull up their socks.”
With Lore taking charge, Walmart’s top online executive Neil Ashe is set to depart after a transition period, according to the Wall Street Journal. But he may not be the only casualty.
“If I were an engineer in Walmart.com, I would be very nervous for my job right now,” said Mulpuru. “This could displace them significantly.”
One of the ways Jet has thus far tried to take on Amazon is through aggressive marketing and by investing a significant amount into advertising. The company has spent between $20 million and $25 million a month on advertising, in an attempt to build its brand and get people to try the site. With Walmart already a recognizable brand with a sizeable footprint, that may be scaled back now.
“All the media and marketing partners of Jet are definite losers since Jet spent a fortune on advertising and customer acquisition,” said Goldberg. “With 145 million customers that walk into Walmart’s stores, that won’t be a necessity anymore.”
Some agencies are giving summer Fridays a second look so employees can ‘enjoy their life again’
Agency executives say that the increased focus on taking advantage of summer Fridays this year is to help employees take the time they need to relax, improve mental health after a difficult year and avoid burnout.
As brands test Amazon’s direct link between digital ads and Whole Foods purchases, they spot new data nuggets — and gaps
Advertisers are using Amazon's recently-launched attribution feature to see how digital ads drive real-life purchases at Whole Foods.
‘I don’t think their outlook is dire’: Why a return to in-person events hasn’t deterred marketers on Clubhouse
Even with vaccine rollout and a return to in-person events, marketers still see the value in Clubhouse communities formed during the coronavirus pandemic.
SponsoredHow The Company Store is reimagining customer experiences for pandemic-era growth
Throughout the pandemic, some retail categories have been inherently successful. Home furnishings and décor are among them; with consumers spending so much more time at home, updates and renovations flourished. Criteo data from the first half of 2020 showed sales for items like outdoor furniture sets up 434% year over year, with other home items […]
‘Bridge the gap between paid and organic’: Why Reddit is building an in-house agency to work with brands
Reddit is building an in-house creative strategy agency, KarmaLab, in a broader bid in recent years to grow its ads business.
Cheat Sheet: Why Roblox is fast becoming one of the most important media businesses of the future
Gamers spent 9.7 billion hours on Roblox in the first three months of the year. Here's a look at how the company became one of the most important media businesses of the future.