In an effort by Wal-Mart Store, Inc. to increase its range further than brick and mortar stores, it was officially publicized last August 8, 2016 that Walmart attained the e-commerce firm Jet.com for $3 billion. It would be one of the biggest investment of any e-commerce company and would give support to Wal-Mart’s flagging online sales.
Wal-Mart runs a chain of hypermarkets, discount department stores and grocery stores,it is an American multinational retail corporation.
According to the contract, the US giant retailer settled to pay approximately $3 billion in cash plus the company’s shares worth approximately $300 million, bringing the deal outlay to $3.3 billion.
Jet.com started its operations not more than a year ago. It made a thrill after getting millions of dollars in investments from venture capitalists that valued the firm at $600 million even before it vended a single product on its podium. In November, the firm accomplished to produce $618 million in new funding, after the $300 million previously raised, carrying its market value to approximately $1.35 billion during that time. In July, the company’s sales increased 168% compared to August 2015. On the other hand, Wal-Mart’s online sales for the same period, witness a moderate progress of 30%.
And at the 1st quarter of the year, Wal-Mart’s online sales upsurge by 7% as the retailer fought to keep the speed up during rigid consumption arrangements in the US and abroad. The attainment would support Wal-Mart to increase its online sales, as investors are pressuring the management for development.
Jet.com, which repeatedly placed itself as a competitor of Amazon.com, would provide assistance to seller’s to be able to develop their methods to increase their existence in the world’s largest economy.
Since November 2014, Amazon Inc. is the largest internet company and a multinational consumer electronics company in the United States.
Although in terms of online sales, Wal-Mart is the second largest US retailer. For its 1st quarter of fiscal 2016 earnings results, it reported a 7% jump in digital revenue, which is lower compared to the 17% increase in the previous year. This strong financial results led to a significant stock rally of 6.29 points or almost 10 percent, as shown in the chart below.
Then again, Amazon reported a 32% progress in sales in the same period.
Moving forward, the collaboration of Wal-Mart with Jet.com will probably offer an improvement to retailer’s e-commerce division and help it compete with Amazon. Founder of Jet.com, Marc Lore is expected to lead the retailer’s online business for the next few of years and that is part of the deal. Mark Lore, who is commonly called as one of the smartest guys in the e-commerce industry, Wal-Mart without difficulty would change into digital commerce, under his management .
In the second half of the year, Walmart showed a solid gain after their 4th of July promotion, "Hope your 4th was full of fireworks," which changed hands at 72.84 on July 1 to 73.22 on July 5, followed by a 73.87 rally the next day for this year.
It appeared that the threat Amazon presented to Wal-Mart Stores, Inc., in five decades of development was growing each quarter as it fail on creating a solid basis in the e-commerce space. On the other hand, Wal-Mart is too big of a business to be to be threatened.
There will be discounted products and Walmart prices will be much lower than Amazon. Jet.com approved of a low price strategy to enter into the market completely. All of its products will be 10% to 15% lower than its rivals.
Jet.com would support Wal-Mart’s approach to increase its online sales. This would also support to lessen the difference between Amazon and retailer’s sales in the near future by burning cash stream.
In addition, earlier this year, Walmart announced a subscription-based delivery service and it is called Shipping Pass, similar to Amazon.com's Prime shipping service. Walmart also added a grocery delivery service partnership with Lyft and Uber.
Although, It is not realistic to think that Wal-Mart’s can take down Amazon.com and might not see profit immediately with Jet.com but give it few more years and with the right approach it might be possible and sooner, it is achievable. With every opportunity and holidays there is, I am sure Wal-Mart will do what it takes to improve with the support of Jet.com.