The Walmart-Jet purchase that everybody has been talking about has finally been agreed. The online retailer Jet.com was purchased by Walmart in a deal said to be around $3.3 billion. In what is one of the highest valued acquisitions of an online company, Wal-Mart and Jet will apparently continue to operate with their existing distinct brands. Which, in a way, demonstrates Wal-Mart’s purpose in purchasing the online business.
Part of the $3.3 billion for the Walmart-jet purchase will be paid over a period of time. Also, $300 million of Walmart shares will be paid over time as part of the deal. This is good deal for Jet, who has been operating its site for just over a year. CEO of Wal-Mart Stores, Doug McMillon, stated that Walmart.com will grow faster and will enable the Jet brand to increase its success over less time. The ultimate winners will be the customers of both companies.
A major benefit to Walmart will a fresh injection of the ‘entrepreneurial spirit’ that company needs to liven it up. It is expected that the deal will be closed in 2016, subject as always to regulatory approval. The largest e-commerce acquisition in the US before this was the $2.4 billion purchase of Zulily by QVC in 2015.
Jet is an innovative e-commerce company. It was founded by current CEO Marc Lore along with Mike Hanrahan and Nate Faust. Lore was also cofounder of Quidsi, a company he led that also parented the three e-commerce firms Diapers.com, Soap.com and Wag.com. Quidsi was ultimately sold, and the purchase of Jet by Walmart will provide it with a rich infusion of new ideas and a high level of expertise in online marketing.
The Walmart-Jet purchase is a great way for Walmart to manage and improve its internet presence by the purchase of a company that gained over $1 billion in just over a year in run-rate gross merchandise value. It is a good way to progress its online presence and expertise without taking eyes off its lucrative mall store offline business.
The deal enables Walmart to compete with Amazon on a level playing field. Both now have e-commerce expertise, and this is undoubtedly the main reason for the Walmart-Jet deal. There is a great deal of business available online, and by offering credible competition with Amazon, Walmart is now confident of acquiring a good share of that business.
It is also good for Jet, of course. Not only has it risen phenomenally in just over a year, but it has the stability of Walmart behind it for the future. Both firms will benefit for their own reasons and the founders will certainly not have suffered through their own success with Jet.com in just over a year!
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