On Monday August 8, 2016, Retail giant Wal-Mart Stores, Inc.(NYSE:WMT) has unveiled plans to takeover e-commerce site Jet.com for reported $3.3 billion in a move that could help bolster its online retail sales.
Walmart was finding it hard to compete against online retailers like Amazon. Jet.com has climbed in the e-commerce space since it started in 2015, challenging some of Amazon’s prices.
This agreement marks the newest move by retailer, branded for innovations in efficiency that have given it a pricing advantage across its vast store network, to try to bring the same spirit of modernism to its Web operations. Online sales are still just a fraction of Walmart’s overall business, coming in at $13.6 billion last year out of $482 billion in total revenue. Amazon hit more than $100 billion in sales in 2015. Walmart is the second-most trafficked retail website in the U.S. behind Amazon.
According to reportsWal-Mart Stores, Inc.(NYSE:WMT) will keep Jet as an individual brand but plans to tap into Jet’s bulk collection strategy to boost its e-commerce business at a quicker rate and reach more Millennial customers. Jet also attracts to a wealthier shopper than Walmart, with customers more likely to have annual incomes greater than $150,000, according to data from NPD Group.
Company’s chief executive Doug McMillon, said the deal would help quicken the growth of Jet.com and Walmart’s own website.
“We’re observing ways to lower prices, widen our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Mr McMillon. “We believe the acquisition of Jet accelerates our progress across these priorities.”
Walmart said it will pay $3 billion in cash and $300m in stock. Walmart and Jet.com will remain separate companies, but will co-operate over technology.
In July 2015 Jet.com was launched by tycoon Marc Lore. He sold his last company Quidsi, the mother company of a family of websites including Diapers.com and Soap.com, which was sold to Amazon in 2011 for $545m.
Jet.com set off using a pricing strategy that presented concessions for bigger orders and against $50 subscription charges. That subscription model was dropped after three months.