Retail: Wal-Mart to buy online retailer Jet.com.
NEW YORK >> Wal-Mart is buying fast-growing online retailer Jet.com for $3 billion in cash plus $300 million in stock, scooping up a newcomer that launched a year ago with the intention of challenging online leader Amazon.
The deal announced Monday shows Wal-Mart is trying to compete more aggressively and effectively as it has seen its online business growth slow, even with big investments in distribution centers and expanding services. In June, it announced it was forming a partnership with JD.com in China to bolster its presence in that market.
Analysts say Wal-Mart buying Jet.com still won't enable it to catch up to Amazon in sales, but it will help widen the gap between itself and other retailers online. The deal also reflects the difficulties for startups like Jet.com to make it on their own in a sphere Amazon dominates with its network of distribution hubs and the powerful asset of its Prime membership program.
The move follows a series of acquisitions by major traditional retailers of online startups in an extremely competitive landscape. In January, Hudson's Bay, which owns Saks Fifth Avenue, purchased flash-sales site Gilt Group. And in June, Bed, Bath & Beyond bought One Kings Lane.
"This acquisition in tandem with its joint-venture in China with JD.com, demonstrates that Wal-Mart is attacking online retail with significant zeal," said Moody's lead retail analyst Charlie O'Shea. "As we believe 'catching' Amazon online is an unrealistic goal for any brick-and-mortar retailer, Wal-Mart now has a definite leg up on its competitors in the very important race to be No. 2 online."
As part of the deal, which Wal-Mart expects to close this year upon regulatory approval, Wal-Mart Stores Inc. and Jet.com will maintain separate brands. Walmart.com will stay focused on the company's low price strategy and Jet.com will still provide a curated assortment of products. The acquisition will help Wal-Mart grab a higher-income customer who typically is younger than its own shoppers. Jet.com, launched in July 2015, sells 12 million products, from jeans to diapers and has been growing fast. It has more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders.
Wal-Mart says it also will incorporate some of Jet.com's "smart" technology that lowers prices in real time by looking for ways to cut costs. For Jet.com, which has been pouring money into splashy TV ads and other marketing, the deal provides big financial backing.
"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 Wal-Mart CEO Doug McMillon said in a statement. "It's another jolt of entrepreneurial spirit being injected into Wal-Mart."
Jet.com, which touts its service, delivers to two-thirds of the country overnight in its purple boxes.
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