Walmart Helps Small Businesses by Buying Jet.com
An ironic twist: how Walmart helped small businesses when buying Jet.com
On August 8th, 2016, Walmart Stores Inc. made a bold decision to purchase Jet.com for North of $3 billion. The exact deal, with about $3 billion in cash and $300 million in Walmart shares, could become the day when a legitimate competitor to Amazon.com was born. (Wall Street Journal)
It’s important to emphasize, when I say “born” I mean exactly that – and definitely not arrived.
Let’s take stock of today’s ecommerce landscape at the start of Q4 2016. Amazon.com is crushing everyone. Whether it is Amazon’s command over the first search for a product online (55% of searches), the fact that 94% of consumers plan to shop on Amazon this holiday season, or that half of US households regularly shop on their marketplace – Amazon commands a huge lead in ecommerce. (BloomReach)
With this much traffic on their site, Amazon is reaping the benefits of the billions of dollars they have invested over the past 20 years in growing their marketplace and distribution system. But what does that mean for everyone else? Even though Amazon allows companies to list their products on the Amazon Marketplace, history is full of examples of when one company had a crushing lead over their competitors and the imbalance of power had a crippling effect on competitors. What would happen if Amazon decided to stop allowing companies to sell on their marketplace? Or if they increased their fees to improve their profitability? It’s these and many more risks that make the news of Walmart buying Jet.com so important.
For those of you who have never heard of Jet.com the short story is that Jet.com is an ecommerce marketplace that uses proprietary algorithms to attempt to provide greater savings for goods than other ecommerce marketplaces. Jet.com has burst onto the ecommerce scene and has already surpassed $1 billion in sales since it launched in July of 2015. (Business Insider)
While $1 billion in sales is peanuts compared to Amazon’s sales, Jet’s technology and the leadership that ecommerce guru Marc Lore provides, have created a compelling opportunity for Walmart – a brand that needs all the assistance they can get to reignite lagging online sales. Even with billions of dollars in investments, Walmart has struggled to continue to grow their online sales in recent years and has fallen further behind Amazon. (Geekwire)
Now that all has the potential to change. As Marc Lore’s presence influences both Jet.com and Walmart.com, and he is backed by Walmart’s monetary war chest and distribution network, both entities stand a fighting chance in the future of ecommerce. As a digital consulting firm providing web development in Portland, we’re very excited to see what becomes of this new development in the years to come – particularly for companies in ecommerce. Time will have to pass before we know if this move made the difference for either company in trying to keep up with Amazon, but without each other, neither company stands much chance.