The Olympic Games in Rio may be over, but another battle of the bests is just starting to get interesting. Earlier this month Walmart made an offer to Jet.com – an exciting e-commerce start up – for $3 billion in cash and another $300 million in Walmart shares, making it the largest acquisition of its kind. This play not only bolsters Walmart’s own e-commerce capabilities, but also makes a bold statement to Amazon that the battle over this channel isn’t over just quite yet.
Here are the three things you need to know.
1. Walmart is sick and tired of lagging behind Amazon
While Walmart may be the 800-pound gorilla in the big box retail space, Amazon dwarfs
them when it comes to e-commerce. Walmart has been fighting back to try and win the estimated 270 million customers that will be shopping online by the end of the decade, but
it hasn’t been enough. Amazon is just growing at a much faster rate and Walmart couldn’t keep up. Walmart needed to make a bold move, like setting the record for most expensive acquisition
of an e-commerce start up, or they risked being lapped by Amazon in the near future.
2. Jet.com helps Walmart in two of its problem areas
On the surfacem this play looks simply like a way for Walmart to remain competitive in an important space. However, dig a little deeper and you’ll see that Jet.com can lend a hand to Walmart in two areas where it typically falls short: Creating an integrated omnichannel shopping experience and appealing to a wider range of shoppers.
The first of these is in connecting the proposition of Walmart’s brick and mortar stores – everyday value for its shoppers – with its online identity. Jet.com has an unbelievably sophisticated and personalized pricing structure that helps to do just this. What shoppers pay is determined based on an algorithm that looks at a variety of factors like the makeup and size of their basket and the relative cost of fulfilling that specific order. This fits perfectly with what Walmart needs to do.
The second way in which Jet.com helps is by elevating the Walmart brand to reach a more aspirational target for the retail giant: Millennials and more affluent shoppers, both of which already are using Jet.com and are being aggressively wooed by Amazon and Target, another of one of Walmart’s biggest competitors.
3. Connecting its ecosystem remains Walmart’s biggest challenge
While Jet.com will surely bring a lot to the table in terms of boosting and improving Walmart’s e-commerce capabilities and sophistication, the tables won’t be turning overnight. As of today, the plan is for both brands to remain separate entities. This calls into question exactly how Jet.com will help Walmart immediately. This is reminiscent of Apple’s decision to acquire Beats headphones, a move which has left many still scratching their heads. Brands need to pay close attention to how Walmart begins to build these bridges and identify opportunities for themselves. Integration of e-commerce data to influence the in-store journey and brand-owned content pages within Walmart.com are just two of the many possibilities for brands.
It’s only been less than a month since news of this acquisition broke and things are already getting interesting, but many questions remain. What will Walmart’s first move be? How long before we start seeing changes to Walmart.com? What about implications on Walmart’s in-store environment? How will Amazon respond? Stay tuned for answers to these questions and more. The gloves are just coming off and this will be one fight to watch.