If you have $3,3 billion lying around, why not buy a start-up? That is exactly what Walmart is doing.
The retail giant is buying two-year-old e-commerce start-up Jet.com in an attempt to invigorate its online sales division. Walmart is dropping a lot of money on this deal, but it hopes to get a lot in return.
What are the deal’s details? Erika Morphy gives us the background:
Walmart is buying Jet.com, an e-commerce site for the tidy sum of $3,3-billion, $3-billion of which will be in cash, to augment its own online sales operations.
Jet.com’s customer base does not align with Walmart’s customers, which could be a point in the deal’s favour only a fifth of Jet.com buyers have purchased from Walmart.com in the most recent six-month period.
Millions of people have bought items from Jet.com, but it may not be a household name for everyone. So what do we know about the e-commerce site? Jason Del Rey fills in the blanks:
Jet sells more than 12-million products A little less than a third of its sales volume comes from items that Jet stores in its warehouses and sells directly to customers.
Jet has a discounting model, dubbed the Smart Cart, that rewards customers with greater discounts as they add more items to their order.
It also gives customers additional discounts if they forfeit the right to return an item, or [if they] pay with a debit card. Four million people have made a purchase on Jet since it launched.
But what is Walmart’s impetus for buying Jet? Turns out, this is part of a larger trend.
Nandita Bose has some insight into Walmart’s purchase:
The deal follows a five-year e-commerce acquisition spree in which Walmart has already bought 15 start-ups, seeking the talent and technology to make it a dominant player online and narrow the massive gap with market leader Amazon.
Walmart’s online division has underperformed against Amazon, posting its slowest growth in a year as it struggled to gain traction with consumers, especially millennials.
So if the Jet purchase helps Walmart catch up with Amazon, this deal could turn out well for both companies. But they aren’t the only ones happy with this deal. It promises to pay out nicely for at least one Pennsylvania family. Anita Balakrishnan has the details:
Walmart’s acquisition of Jet.com was potentially a flush exit for early employees and its familiar big-name investors but it was also a probably huge windfall for 10 people who – like Pennsylvania’s Eric Martin – won significant equity in the company.
Martin won 100 000 shares in Jet.com as part of a contest aimed to get users to refer the most family and friends to the site.
That means he’ll likely get some slice of Jet’s $3,3-billion price tag, along with a handful of other contest winners, who each got 10 000 shares.
By Rebecca Link for www.computerworld.com