Walmart's push to take on Amazon took a big step forward Monday.
The big-box retailer closed its $3.3 billion acquisition of e-commerce retailer Jet.com, pulling off one of the biggest e-commerce deals ever and giving Walmart a new set of tools and talent to bulk up online. Still, Walmart now faces the difficult job of making this tie-up pay off by bringing together all its resources to create an Amazon alternative people will want to use.
Jet, led by e-commerce veteran Marc Lore and backed by hundreds of millions of dollars in funding, launched its site a little more than a year ago, offering consumer products ranging from laptops to shampoo to furniture.
The size of the Jet deal, which was first announced last month, shows how serious Walmart has become in wanting to be a bigger force online, in hopes of goosing its lagging sales growth and stopping Amazon from stealing its customers. (In a nod to Walmart's effort to become more tech-focused, CEO Doug McMillon broke the news of the Jet deal closing on Instagram.) Walmart has been trying for years to become a more significant player in e-commerce, pouring billions of dollars into its warehouse infrastructure and website. But, so far, it's had little to show for it, with its e-commerce sales growth slowing in most recent quarters.
Walmart is paying a king's ransom to bring on Lore, the new CEO of Walmart's e-commerce arm in the US. Lore, who led the parent company of Diapers.com before selling it to Amazon for $545 million five years ago, will receive more than 3.5 million Walmart shares in the deal -- worth roughly $250 million as of Monday -- which will vest over five years.
The deal should help Walmart reach more users online, helping the company access Jet's wealthier customers who may not typically buy on Walmart.com. Jet customers tend to spend more than Walmart and Amazon customers on high-end products, such as athletic shoes and fragrances, according to a study from researcher 1010data. For example, the average Jet customer spends $55.85 on athletic shoes, while the Walmart.com customer spends just $16.42.
Also, both Jet and Walmart like to encourage their customers to bulk up their orders, so the two sites will benefit from that common strategy.
On the negative side, even together Jet and Walmart make up just a sliver of the US e-commerce market, while Amazon is by far the largest online seller. Additionally, Walmart and Jet now have to figure out how to integrate their teams and technologies, while operating two separate websites: Walmart.com and Jet.com.
That means that if Walmart does plan to catch up to Amazon, Jet won't rocket the company there soon.