The world’s largest retailer is paying top dollar for an e-commerce startup in its bid to take on Amazon.
Walmart is buying Jet.com for $3.3 billion in cash and stock in what is the biggest e-commerce acquisition in the past seven years. As reported by Recode, the deal was finalized over the weekend, and Jet co-founder and CEO Marc Lore will continue to run Jet as well as Walmart’s U.S. e-commerce operations after the acquisition closes. The deal includes $3 billion in cash, as well as $300 million in Walmart stock that will be paid out over time as part of an incentive bonus plan for Jet executives.
Jet.com launched in July 2015 and has focused on differentiating itself through bulk buying: Customers are able to save money by adding various tagged items to their shopping carts that can be shipped more cheaply in the same box from a nearby vendor. Jet has secured more than $800 million in financing since its founding but is spending $20 million to $25 million on advertising a month to fund its growth, but it is not profitable, according to Recode.
The Recode article also noted that Walmart’s $14 billion in annual e-commerce sales is a fraction of Amazon’s $99 billion and is growing slower than the industry average, and Its growth rate has decelerated for five consecutive quarters, and although the consensus appears to be that the Walmart / Jet.com marriage is a good fit, Walmart’s e-commerce revenues are likely to remain nothing more than a blip as compared to Amazon.