At press time, Walmart has yet to acquire Jet.com, as The Wall Street Journal suggested was a $3 billion possibility on August 3. But industry experts say Walmart’s acquisition of Jet.com could be kind of a big deal.
Slice Intelligence‘s data shows that Jet.com’s growth growth have far outpaced Walmart.com’s growth, three of Jet.com’s top-5 product categories do not overlap with Walmart.com’s, and that Jet.com caters to a slightly different shoppers demographic.
Excluding the holiday season, Slice’s data shows that Jet.com’s sales in July 2016 have grown 168% relative to August 2015. WalMart’s online sales, meanwhile, have grown only 30% over the same time period.
Jet.com leads Walmart in CPG-related sales, with Health & Beauty and Grocery & Gourmet Food each accounting for over 12% of its revenue since last August, according to Slice. Jet.com and Walmart are both strong in “Electronics & Accessories” and “Home & Kitchen”. The two categories combined to make up over 50% of sales on Walmart in the last year and almost 40% on Jet.com.
Walmart’s buying population is more predominately female, less educated, and slightly older than Jet.com’s, according to Slice. Walmart and Jet.com shoppers, on average, seem to spend roughly the same per order ($75). Walmart shoppers, however, ordered an average of 2.6 times over the last year, whereas Jet’s only ordered 1.7 times.
Walmart’s potential acquisition of Jet.com is one in a series of attempts to compete with Amazon while also finding a “third way” that seeks to embed a software firm within a traditional retailer by acquiring niche web technologies in social, analytics, and web infrastructure, said Rick Chavie, CEO of data management and product information management solution provider EnterWorks.
“What is unique about this acquisition is the departure from that third way strategy in buying a full-on ecommerce retailer that has shown the industry how to ramp up a customer base rapidly,” Chavie said. “Such a potential acquisition is not surprising given Walmart CEO’s admission of disappointment in the ongoing decline in their ecommerce growth rate after Amazon posted 32% growth in the first quarter.”
Chris Taylor, founder and CEO of retail store SaaS provider Square Root, said Walmart has struggled to convert its brick-and-mortar expertise to online sales, and acquiring Jet is a smart move for the company as they look to compete with Amazon’s ecommerce dominance.
If the deal goes through, Taylor said Walmart will gain deep insights into the inner workings of the ecommerce industry through Jet’s platform, and will become a fierce competitor for Amazon. Walmart has already put into place plans to bolster its online site and moving into the holiday shopping season, and Taylor said this acquisition would have a huge impact on its seasonal sales both in-stores and online.
“Walmart has been adjusting their omnichannel strategy to keep up with consumers’ fluctuating shopping habits and the desire for a consistent shopping experience online and offline,” Taylor said. “This deal makes sense for Walmart in the long-run as they aim to compete with both bricks-and-clicks.”
Stephan Schambach, who founded ecommerce platform provided Demandware and is CEO and founder of mobile platform provider NewStore, said Jet.com set out to dethrone Amazon, but hasn’t had the scale nor logistics advantages needed to really compete. And Walmart continues to snipe away at Amazon with programs such as ShippingPass.
“[Walmart’s] hope is that once you start using it you’ll notice the low prices on everything, and become loyal,” Schambach said. “That’s wishful thinking. Amazon has proven that convenience trumps low prices in achieving sustained loyalty.”
Consumers have been trained by Amazon to expect shorter delivery windows, but the majority of retailers can’t afford to maintain hundreds of warehouses. What they can afford to do, Schambach said, is leverage their brick and mortar stores as fulfillment centers.
“This combination of a massive brick and mortar footprint with emerging ecommerce player would put both companies in a better position for battle,” Schambach said. “I still don’t think they’ll be able to beat out Amazon, but it will be interesting to watch them try.”
If Schambach has one piece of advice for Walmart, it would be to let the tail wag the dog. Schambach said it would be a shame for Walmart to suck Jet.com up and weave into their world, when Walmart should let in and embrace the passion and excitement from Jet.com as the company going after Amazon.