Jet.com background story:
Marc Lore, CEO of Jet, has been battling Amazon for a while now. Before founding Jet.com, Lore was previously founder and chief executive officer of Quidsi, that is best known for its popular website Diapers.com, who he founded in 2005. The company was very successful and reached the point of producing $300 million in annual sales. In 2010 Lore faced a price war against Amazon that his company couldn’t afford. In consequence, Lore had to stop competing against the e-commerce giant, and sell the company for $550 million.
After working at Amazon for a few years and waiting out the non-compete expiry date, Marc Lore founded Jet.com on July of 2013. Marketing to consumers looking to save money, that’s the company’s differentiation point. As Mr. Lore expressed to the Wall Street Journal: ” It’s about saving money. That’s a much bigger opportunity than sites that are focused on convenience”. In the words of the corporation, the mission is to save money on almost anything:
Jet launched with one mission: To become the smartest way to shop and save on pretty much anything. Combining a revolutionary pricing engine, a world-class technology and fulfillment platform, and incredible customer service, we’ve set out to create a new kind of e-commerce experience — and driven by our core values of trust, transparency, and fairness, we want to make that experience more human, too.
Walmart is a successful brick and mortar low-price oriented retailer; Jet.com is also a price-oriented retail, but is e-commerce only. This acquisition will help Walmart to position itself as a solid head-to-head competitor to Amazon.
The following chart compares Jet and Walmart’s growth rates since August 2015. This just shows how Walmart will benefit from the momentum that Jet is experiencing and this acquisition will create some synergy in the company.
Market Watch reports that “according to Slice Intelligence. Jet.com’s sales were up 168% in July 2016 from August 2015. For the same period, excluding the holidays, Wal-Mart’s online sales growth was only 30%” – this compares unfavourably to Amazon’s growth over the same period, which was 38.2% in e-commerce sales.
The following chart shows how Walmart stacks up against Amazon. This evidences the organization’s need to change how it does business, specifically, how it needs a more effective e-commerce channel:
Other sources say that the acquisition may not level the playing field with Amazon, but instead it will help Walmart establish itself against direct competitors like Target. Slice Intelligence analyst Ken Cassar noted that “Target and Walmart have been neck and neck in online sales for the past 12 months”. This means that the growth experienced by Jet could be a game changer for Walmart.
For more on this story make sure to read the sources linked up in our blog or the following sources too: