By now you must have heard that Wal-Mart is acquiring the e-commerce startup Jet for a hefty $3.3 billion, only a year after the latter’s site launched. The deal is the biggest in e-commerce history, but the two businesses still have a lot to work on if they want to outperform Amazon. Here’s what this new arrangement will bring to the table for both Wal-Mart and Jet.com, and what the two still need to work on.
The deal between Wal-Mart and Jet.com is a smart one. The Bentonville, Arkansas-based retail giant has been seeking to amp up its e-commerce arm, which is growing but currently represents only about 3% of its revenue. The acquisition of Jet.com links them up with the talent and technology of a company that’s adding 400,000 new shoppers every month. Indeed, some analysts are saying that the deal between Wal-Mart and Jet.com is more of an acquihire, with Jet founder Marc Lore being the real prize.
While the two companies will remain separate for now, Lore will now lead Wal-Mart’s US e-commerce in addition to Jet.com. In addition to Lore’s expertise, Wal-Mart will be getting:
In turn, Jet.com now has a chance to tap into Wal-Mart’s wallet as well as its network of distributors, manufacturers, and sellers. The two businesses still have a lot to catch up on, though. We can’t talk about online retail giants without mentioning Amazon, so here it goes: Walmart.com sales amounted to $13.6 billion last year, putting it in second place behind Amazon, whose e-commerce revenue came in at $107 billion. While Amazon still decimates Wal-Mart in this regard, we shouldn’t forget that Wal-Mart’s total revenue for 2015 was $485 billion.
When you consider the above numbers, it’s clear that Wal-Mart and Jet.com aren’t in a position to overtake Amazon anytime soon. Amazon has so many arms, including its cloud services and content streaming, that give it a huge boost when it comes to marketing and bankrolling their retail efforts. Its customer experience is superior and infinitely more seamless. Wal-Mart and Jet.com, right now at least, are competing with it mainly on price, and that’s the problem.
Whether the ultimate goal is to outpace Amazon, or to always be #2, Wal-Mart and Jet.com have to up the ante on convenience. What exactly does that look like?
Price has taken Wal-Mart and Jet.com very far in their own ways, but they’ll need to get consumers to buy into the bigger picture, a story of one-stop-shop convenience, if they really want to excel.