Walmart winds down Jet.com four years after $3.3 billion acquisition
An employee checks the contents of a sales order before sealing the package for shipment at the Jet.com fulfillment center in Kansas City, Kansas.
Daniel Acker | Bloomberg | Getty Images
Four years ago, Walmart made an expensive bet on its future in terms of electronic commerce. He paid $ 3.3 billion to buy Jet.com, an e-commerce start-up that he hoped would attract younger, affluent and urban customers and help it fend off the rapid growth of Amazon.
On Tuesday, Walmart announced the shutdown of Jet.com and the phasing out of the brand.
Walmart CEO Doug McMillon said the company has won more than just a name. During a call with analysts, he credited the acquisition for “relaunching the progress we have made in recent years”. He highlighted Walmart’s curbside pickup, home delivery and the expansion of categories beyond the grocery store, such as clothing and home decor.
“Although the brand name may still be used in the future, our resources, human and financial resources have been dominated by the Walmart brand because it has so much traction,” he said. “We see the Walmart brand resonate regardless of income, geography or age.
Jet.com founder Marc Lore directs Walmart’s ecommerce operations in the United States.
McMillon said Walmart “does not anticipate significant accounting charges as a result of this decision”. He said that most of the employees had been transferred to positions related to the Walmart brand.
In the years since Walmart bought Jet.com, he bought other digital natives, like men’s clothing company Bonobos, and gave birth to others like the mattress brand, Allswell. He developed his collection and home delivery activities. And he launched new online offerings, including express delivery, a new door-to-door store service that delivers to customers’ homes in less than two hours.
These investments have paid off as growth in e-commerce. Last year, e-commerce sales increased 37%. During the coronavirus pandemic, they jumped 74% in the first quarter and attracted customers who tried its services online for the first time.
But Walmart’s e-commerce activity has yet to make a profit. He is still trying to expand his online sales beyond the grocery store. And Amazon continued to be a tough rival.
Some initiatives have been expensive. He bought, but then sold the women’s clothing company, ModCloth. He closed Jetblack, a high-end personal shopping service for affluent families in New York, in February. Thanks to the member-only service, customers could order items by SMS, whether a bottle of champagne or a box of diapers, and have them delivered on request. It was launched in 2018 and initially directed by Jenny Fleiss, co-founder of Rent the Runway.
Lore said Tuesday that Walmart continues to expand its assortment of higher-margin items, such as home decor and fashion, and to add new brands, such as Ray-Ban, Keds and Champion. He said he would build on his e-commerce gains during the pandemic.
Charlie Moody’s retail analyst Charlie O’Shea said on CNBC’s “Squawk Box” that the pandemic has caused more customers to try new retailers, to feel comfortable doing their shopping online and discover the convenience of curbside pickup.
“You will see much faster growth online than we thought before,” he said. “You’re going to see a lot of brick and mortar retailers demonstrating to consumers that” Hey, it’s not just an Amazon world here online. We are here too. “”