Walmart is buying Jet.com for $3.3B, I guess they want to better take on Amazon http://www.cnbc.com/2016/08/08/wal-mart-to-by-jetcom-in-3-billion-deal.html
In a bid to juice its online business, the world’s largest retailer agreed Monday to purchase Jet.com in a $3.3 billion deal. The acquisition will beef up Wal-Mart’s e-commerce prowess, from deepening its bench of talent to finding the cheapest way to ship online orders.
These capabilities should help Wal-Mart grab a larger piece of the growing e-commerce pie. They’re also the best chance it has of closing the wide — and growing — gap between it and Amazon, analysts said.
Amazon’s North America sales topped $62 billion last year. Forrester estimates the company grew its U.S. retail business by $23 billion, accounting for roughly 60 percent of total digital sales growth here.
Though Wal-Mart’s e-commerce growth its slowing, its $13.6 billion in digital revenue already make it the second-largest online retailer. Yet even if it remains in second place, Jet is still worth the hefty price tag, analysts said.
Jet’s co-founder and CEO Marc Lore will lead both Jet and Wal-Mart.com, bringing his vast e-commerce experience as a co-founder of Quidsi, the parent of Diapers.com, which was sold to Amazon.
The retailer’s capital expenditures budget for the five years ended January 2012 was roughly $15.5 billion, during which time it opened more than 3,000 stores, O’Shea said. That compares with $14.6 billion over the last four years, when it only opened 1,000 stores. Many of those were smaller format, making them less capital intensive. Wal-Mart had $7.6 billion in cash and cash equivalents at the end of the first quarter.
The world’s largest retailer said a portion of the $3 billion it’s paying for Jet, along with $300 million in Wal-Mart shares, will be spent over time. Terms of those payments were not disclosed
Although Jet has been operating its site for only a little more than a year, it has already reached $1 billion in run-rate gross merchandise value, and boasts a growing customer base of urban and millennial customers. The site says it has been adding more than 400,000 new shoppers each month and processes an average of 25,000 orders daily.
Jet uses an algorithm that it promises will deliver lower prices. Customers can save by buying in bulk from the site, or by forgoing the chance to make a return. The company originally planned to charge a $50 annual fee, but that was quickly nixed.
McMillon said Jet’s business model of encouraging shoppers to buy in bulk fits nicely with Wal-Mart’s historical positioning as a place where people can stock up during one big trip. He added that Jet’s pricing algorithm fits with its ethos of always offering the lowest prices.