Wal-Mart to Acquire Jet.com

Wal-Mart, and Jet.com, announced they have entered into a definitive agreement for Walmart to acquire Jet for approximately $3 billion in cash, a portion of which will be paid over time. Additionally, $300 million of Walmart shares will be paid over time as part of the transaction. The acquisition will build on and complement the significant foundation already in place to serve customers across the Walmart app, site and stores and position the company for even faster e-commerce growth in the future by expanding customer reach and adding new capabilities.

“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Doug McMillon, president and CEO, Wal-Mart Stores, Inc. “We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Wal-mart.”

The New Jersey-based Jet.com first went live on July 21, 2015. So the deal was signed just over a year after the site was launched. Jet.com has accumulated more than $500 million in venture funding, and is valued around $1.6 billion. The deal is the largest ever purchase of a U.S. e-commerce startup and Wal-Mart’s biggest attempt to date to chase down Amazon, which has dominated e-commerce in much the same way that Wal-Mart has ruled brick-and-mortar retail. Jet’s founder Marc Lore will join Wal-Mart as CEO of e-commerce and be responsible for both Walmart.com and Jet.com. Wal-Mart had spent billions expanding its online operation, started a subscription service similar to Amazon Prime.

Since Jet launched in July, Jet customers have purchased 1.5 times, compared with 2.2 for Target.com and 2.1 for Walmart.com. Between September and December, average monthly sales grew by 28 percent, according to the research Slice Intelligence. Online sales at Walmart are growing at 7-8% year-on-year. Wal-Mart (NYSE: WMT) made only about $14 billion in online sales in 2015, compared with $107 billion 2015 revenue for Amazon (NASDAQ: AMZN). The important distinction here is that while Wal-mart achieved $482 billion in revenue in 2015, only $14 billion came from ecommerce sales. Growth in ecommerce sales fell from 17 percent to just 7 percent over the last year.

In speaking with CNBC about the decision to make this move, Wal-Mart CEO Doug McMillon said “If Wal-Mart were starting today and we were building an e-commerce business some of the things that Jet designed into their approach would have been things we would have thought of and we would have wanted to do, and they’ve just done it from scratch.”