Jet.com is a strong Amazon competitor and Walmart is reportedly very interested in purchasing it—for close to $3 billion.
Three fast facts about Jet.com:
- As an Amazon competitor, it started as a subscription model and offered lower prices on things based on the loyalty of their customers through the subscription fee. In October of 2015, they dropped the subscription model as their CEO said that people are willing to switch where they would buy something, even if the cheaper price is only by a few cents.
- It has had at least $500 million worth of investments and is valued, at the last calculation, at more than $1 billion.
- Jet.com spent a whopping $100 million on advertising in its first year.
The subscription piece was interesting for Jet.com when it had started. It was supposedly touting 10–15% cheaper goods than competitors; they listed prices at around 8% cheaper and additional discounts could be “unlocked” by shipping multiple products together. The novelty of this approach wore off and Jet.com wanted to make money on individual transactions rather than its yearly fee.
Why is Walmart interested in Jet.com?
Walmart’s CEO said in June that it was going to take a more aggressive approach to e-commerce. Amazon’s biggest competitor, Jet.com, seems like a very logical and obvious way to buy your way more heavily into e-commerce if you’re America’s biggest brick-and-mortar retailer.
Walmart has been adding features for their shoppers such as Walmart Pay, which allows customers to check out with their smartphone, and “ShippingPass,” which is their answer to Amazon Prime. Despite planning to invest $1.1 billion in e-commerce this year, and being the second biggest online retailer in America, Walmart’s growth in online sales has stalled out a bit this year: It’s only up 7 percent vs. 17 percent from the prior year period. To put that in perspective, Amazon’s first-quarter growth was 32 percent.
What does this mean for Jet.com?
While all of this may mean serious changes in Walmart’s e-commerce strategy, Wall Street Journal is referring to it as “a disappointing end for one of the most ambitious challengers to Amazon.com, Inc.”
Contrast that with the insight that with the purchase of Jet.com, Walmart would be poised to “crush Amazon” from Business Insider. On this speculation coming out an hour ago, the stock market reflects this idea. Amazon’s stock has taken a dip, but time will tell if Walmart can really leverage the acquisition to “dethrone Amazon” as Jet.com originally intended to do in its start a year ago.
What does this mean for the state of e-commerce?
If you’re a small company selling online, this means the competition at the top is getting a bit more inbred. Overall, a shift toward combining top e-commerce powerhouses means that smaller companies need to emphasize their unique attributes, customer service, locality, or, most importantly, specialization. Specialized companies / e-commerce stores separate themselves in a way that makes it feel like they’re not even really competing with bulk e-commerce retailers in the minds of their customers.
If you’re a customer of Amazon, Walmart or Jet.com, it’s not exactly clear how this will affect your buying experience. Walmart is most assuredly upping its game in every way possible regarding e-commerce, and that alone will likely drive innovation from Amazon.com as they start to feel the pressure a bit more.