It seems like an unlikely pairing—or is it? According to New York Times and The Wall Street Journal, Wal-Mart is interested in purchasing Jet.com, which might leave Amazon shaking in it’s boots. A main part of Wal-Mart’s interest in Jet could be that its growth far outpaces its own. According to e-commerce analytics provider, Slice Intelligence, in July, Jet’s sales grew by 168% compared to August 201, and other eCommerce websites such as Designer Shoe Warehouse are expected to grow as well. And, during that same time period, Wal-Mart’s online sales grew by 30% and that is not counting the holiday season. So, why wouldn’t Wal-Mart want to make this purchase? It seems like the best choice for them in the long run and here’s why:
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A Little History First
Before we jump into this potential partnership, let’s take a look at Jet’s history. Founded only a year ago by Marc Lore, who is best known for his previous eCommerce venture Quidisi.com, Jet.com has seen tremendous growth. In just 2015 alone, Jet raised more than $500 million and was highly anticipated to capture a large share of the growing eCommerce market in the US—there was finally significant competition for Amazon.
But how did Jet.com differentiate themselves from competitors such as Amazon? It differentiated itself from other online eCommerce retailers through its real-time savings engine that gives customers the power to drop prices while they shop. This allowed Jet to revolutionize eCommerce logistics by calculating the most efficient way to fulfill orders and pass those savings onto shoppers—it was a hit!
Impressive Growth Since 2015
Since it’s creation in July 2015, Jet.com has shown impressive toppling growth and has crossed a $1 billion run rate in gross merchandise value with over 4 million shoppers on its platform. Customers are truly embracing Jet’s real-time savings technology by building large online shopping baskets with over six units per order. That also coincides with a relatively high average order value of over $80 per transaction. Jet.com executives also revealed this year that the company is still heavily investing in its brand-building efforts and had not yet reached profitability, which might be an avenue that Wal-Mart could benefit the online eCommerce retailer.
Jet’s Valuable Assets
While Jet did reach an impressive run rate of $1 billion in less than a year, it still isn’t much in the world of eCommerce. This amounts for only less than 1% of the total market in 2015. In addition to Jet’s gross merchandise value, Wal-Mart might be after Jet’s assets, such as creating a more competitive online market. Currently, Wal-Mart ranks 4th in eCommerce sales with just 3% market share. Who’s the leader? Amazon is. At over 31% market share, Amazon.com remains the leader of the US Internet retailing market.
Acquiring Jet would allow Wal-Mart to become a bigger competitor in the industry amongst Retail giants as Amazon and eBay. Jet’s eCommerce practices would greatly assist Wal-Mart in improving its online services—an area they continue to struggle with, but work on updating content regularly with specific deadlines. Jet has also expanded into grocery delivery, which is something Wal-Mart has yet to experiment with.
A Growing Platform
Jet’s expansion into grocery delivery and proven success in same-day delivery, makes it an etailer you don’t want to ignore. Wal-Mart has tried to tackle same-day delivery, but has continued to fall short of success. With Jet, Wal-Mart can move closer to finding that solution.
Additionally, Wal-Mart has worked on expanding their marketplace model, which seems to align with Jet’s model. Currently, Jet.com has 2,300 retailers selling on its platform and 12 million products. Both companies are increasing product portfolios by working with committed sellers and by supporting sellers with improved technology. This means working together would be extremely beneficial for both companies.
While other bidders may emerge for Jet, Wal-Mart continues to remain at the top of the list. Will Wal-Mart actually purchase Jet.com? That is something we will have to wait and see. However, it would be a power relationship if it does pan out.