Walmart teams up with Jet.com, hoping to bloom in e-commerce

Global Business

Walmart teams up with Jet.com, hoping to bloom in e-commerce

In the world of U.S. retail, it’s the old world versus the new. And it looks like the old might lose, because people are doing less shopping in malls and, instead, they shop online.

CCTV America’s Ahmad Coo has the story.

Walmart teams up with Jet.com, hoping to bloom in e-commerce

Walmart teams up with Jet.com, hoping to bloom in e-commerce

Walmart joins forces with Jet.com to gain more market share in the e-commerce world. CCTV America's Ahmad Coo has the story.

“Stores that retailers either lease or own can almost be a liability today,” said David Schick, director of research and lead retail analyst at Consumer Edge Research. “Because the amount of time we spend shopping and communicating online shrinks the amount of time we actually spend in stores.”

Brick and mortar retailers like Macy’s are closing down hundreds of stores as more shoppers shift from the real world to the Internet. And Walmart bought low-price online retailer Jet.com for $3.3 billion.

The deal raised eyebrows because Jet.com has only been in operation for about a year and isn’t quite profitable yet. But others think it’s the right move.

“Walmart has a really long way to building up its e-commerce presence,” Scott Gamm, correspondent for TheStreet said. “And so the thinking with Jet is well- let’s just sort of buy a company that already has the software, the human talent, the infrastructure in place and that could jump start Walmart’s efforts to be more of an e-commerce player.”

Others claim the deal was basically a way to bring Jet CEO Marc Lore into the fold, who’s said to be the key to making the Jet purchase worthwhile. Lore is no stranger to e-commerce success.

“Walmart is ultimately looking to further gain market share in the e-commerce space,” Gamm said. “People don’t actually think of Walmart as a digital behemoth, but of course, they’re trying to stay ahead of the trend and compete with Amazon.”

The deal calls for Lore to work with Walmart for the next five years to manage online operations for both Walmart and Jet.com. If he does, he could make up to $1 billion.

For Walmart CEO Doug McMillon, it’s clear that Lore will be essential in wooing segments of the market that his company has failed to appeal to. In a conference call with investors, McMillon said Jet.com is “more urban and millennial than Walmart.com” and that Jet has been able to attract some brands Walmart doesn’t have.

But some are skeptical that Lore may be able to stick it out because traditional thinking of big-box retailers may prove stifling. If he doesn’t, Walmart’s dream of closing the competitive gap with Amazon may remain just a dream.


Matt Rowe on the future of Walmart

To further discuss Walmart’s big move into online retail and the future of Walmart, CCTV America’s Michelle Makori spoke with Context Asset Management’s Chief Strategy Officer Matt Rowe.

  • J. Alec West

    Correct me if I’m wrong. But as I understand it, customers have to pay a $50 annual “membership” fee to shop at Jet.com … whereas Amazon.com charges nothing. I’ve heard comparisons between Jet.com and Costco. But in Costco’s case, you must remember that many Costco members are business people who buy in quantity … the kind of people who buy (for example) toilet-paper by the case-lot as opposed to much smaller quantities offered in retail grocery stores.

    When I’m in the market for a printer, I’m just looking for “one” printer – not 30. And in visiting the Jet.com site, I see no advantage over Amazon for the “ordinary” consumer. If Jet.com’s primary marketshare is intended to be business owners, I think they might do well. Otherwise, I don’t see much hope for them. Ordinary people usually have much better things to spend $50 on than a membership fee.