Jet.com may be history, but Walmart got what it needed

Jet.com, the nascent e-commerce site walmart (NYSE: WMT) acquired in 2016 for $3.3 billion, is discontinued. Walmart made the announcement in its first quarter earnings report on Monday.

In 2016, the Acquisition of Jet.com was mostly decried by financial watchers, and at first glance it might seem like Walmart threw billions at an upstart website that never came of age. However, the reality is that Jet.com and its founder Marc Lore, who now runs Walmart’s own e-commerce division, fueled Walmart’s own e-commerce growth, making the company the No. of e-commerce sales market, behind only Amazon.

Walmart had also downplayed Jet for years. In 2018, he shifted much of Jet’s marketing budget to Walmart.com, seeing he was getting a higher return on investment there; last year, it merged what remained of Jet’s independent teams in areas such as retail, marketing and technology with Walmart’s teams. Jetblack, an experiment with a concierge service aimed at high-end Manhattan customers, was a loser, and Walmart unplugged it in February.

If there was a time to relax Jet, this is it now. In the middle of the pandemic, Walmart is booming and its sales are increasing both online and in-store thanks to strong demand for groceries as restaurants are still mostly closed and consumers are in the mood to stock up. What Walmart was aiming to do with Jet.com was never entirely clear. At first, CEO Doug McMillon praised his “smart cart” tool, which offered customers a discount when they added more items to their online shopping carts. By absorbing this, Walmart seemed to eliminate Jet’s key differentiator. Sales on the platform actually dwindled from 2016 while it was in Walmart’s hands, and Walmart’s attempt to turn it into a premium brand targeting urban millennials never really took off. .

It’s no surprise that Jet.com is going down the drain, but it would be a mistake to overlook the tremendous strides Walmart has made in e-commerce since acquiring Jet.

An e-commerce center

When Walmart acquired Jet in 2016, global e-commerce growth steadily slowed in previous years despite the growing importance of the online channel. In the first quarter of fiscal 2017, Walmart’s global e-commerce sales grew only 7%. Something had to be done, and that something was dropping billions on Jet.com. Since then, Walmart’s e-commerce sales in the United States have taken off. In the fourth quarter of this year, its first full period with Jet.com, US e-commerce sales grew 29%, including Jet.com, and they haven’t looked back.

In the three full fiscal years since acquiring Jet, Walmart’s e-commerce sales have nearly tripled, jumping 176%. The company quickly expanded grocery pickup and delivery and now has approximately 3,300 stores with grocery pickup and more than 1,850 stores offering grocery delivery, up from a handful at the time of the Jet acquisition. Under Marc Lore’s leadership, the company rolled out free two-day shipping for orders over $35 with no membership fees to compete with AmazonPrime, and this was accelerated to become free one-day shipping year-round. latest, shortly after Amazon did the same in Premier. In the last quarter, Walmart expanded ship-from-store capabilities to 2,500 stores, at least temporarily, leveraging the power of its store base, and launched Express Delivery, promising two-hour delivery. .

Lore has also helped the company significantly expand its online selection, added pickup towers to facilitate in-store pickup, and made a number of acquisitions of digital native brands like Bonobos, though Walmart has more recently removed from this strategy. Since acquiring Jet.com, e-commerce has been a priority and the company has executed it. Online sales are now one of its main growth drivers.

Walmart is still losing money in e-commerce, but saw smaller losses in US e-commerce compared to the year-ago quarter, showing it is moving in the right direction. Letting go of Jet.com should help the company further stem those losses – the startup was never profitable and investing in it no longer makes sense. Walmart does not expect to take on a significant accounting burden for the move, and it said the vast majority of Jet employees have moved within Walmart.

The retailer’s online sales grew 74% in the first quarter, and the company gained operating leverage, a difficult feat that Target, Home deposit, and even Amazon couldn’t accomplish this quarter. This shows that Walmart’s e-commerce business is stronger than ever, and the Jet acquisition is a big reason why.