Walmart fuels e-commerce strategy with $3.3bn Jet.com buy
Walmart prints the largest-ever e-commerce deal with its $3.3bn purchase of Jet.com. The acquisition helps Walmart fill specific gaps in its business and, more broadly, highlights the growing role of M&A among consumer-facing businesses that need to change their strategies to connect with a more connected population.
The world's biggest retailer has struggled to achieve growth in recent years. Last year's sales were down a hair and in the two previous years it posted just 2% growth, amid rising expenses. Part of its strategy to change that trend is to invest in e-commerce. However, e-commerce in the US was a negligible contributor to its growth last quarter and internationally, where Walmart is scaling up its e-commerce operations, it's had trouble doing so. Founded in 2014, Jet has a team that knows how to scale up quickly – the business is already approaching $1bn in annual goods sold.
Jet's differentiator is its ability to lower prices through a better understanding of shipping and fulfillment costs. That also aligns with a notable Walmart priority: the company plans to invest heavily in reducing its prices over the next few years to recapture what was once its edge in the offline retail market. Jet's team may have limited ability to help Walmart on pricing its in-store goods; however, the target has the knowledge to enable Walmart to more effectively battle Amazon in terms of price.
Today's transaction highlights the degree to which offline brands have embraced online technologies as an important avenue to engage with customers, rather than a secondary distribution channel. Until last year, large tech acquisitions by retail and consumer goods vendors were a rarity. No longer. Unilever's entry into the shaving market via its pickup of Dollar Shave Club, recent deals by Nordstrom and Bed Bath & Beyond, and a string of mobile app purchases by athletic apparel giants Under Armour and adidas show that digital transformation isn't limited to the IT department.
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