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Wal-Mart acquires Jet.com to go head to head with Amazon

By Vivian Hendriksz

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Business

London - US retail giant Wal-Mart Store has agreed to acquire Jet.com in the biggest deal made for an e-commerce startup - approximately 3.3 billion US dollars, as it aims to go head ot head with online mongul Amazon.

Wal-Mart, the world's largest retailer, announced on Monday it agreed to acquire Jet for approximately 3 billion US dollars in cash, in addition to paying out 300 million US dollars of Walmart shares over time. The acquisition is said to build on Wal-Mart's online business, which has struggled over the the past months, posting its slowest growth in a year during its last quarter. Walmart online sales hit 13.7 billion US dollars in 2015, according to research firm Internet Retailer.

Walmart.com and Jet.com to to remain independent brands following acquisition

"We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want," said Doug McMillon, president and CEO, Wal-Mart Stores, in a statement. "We believe the acquisition of Jet accelerates our progress across these priorities. Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart."

The purchase of Jet.com underlines Wal-Mart ambition to succeed online and compete with e-commerce leaders such as Amazon. Jet.com is listed among the fastest growing e-commerce companies in the US and is said to "infuse Walmart with fresh idea and expertise," according to a press release. The online startup was first launched by Marc Lore last July and initially offered shoppers major discounts and low prices based on a pricing scheme which took into account external factors, such as the number of goods customers placed in their shopping cart for an annual fee of 50 US dollars. However, Jet.com changed its strategy later on and removed its subscription model, which contributed to its steady success.

"We started Jet with the vision of creating a new shopping experience," said Lore. "Today, I couldn’t be more excited that we will be joining with Walmart to help fuel the realization of that vision. The combination of Walmart’s retail expertise, purchasing scale, sourcing capabilities, distribution footprint, and digital assets – together with the team, technology and business we have built here at Jet – will allow us to deliver more value to customers."

Both Jet.com and Walmart will maintain distinct brands. Walmart.com will focus on delivering the company's 'Everyday Low Price' strategy, while Jet.come aims to continue offering a unique and differentiated customer experience with curated assortment.Together the two will leverage innovative technology solutions and develop new offerings to help customers save time and money. The recent acquisition comes not long after the US retail giant sold off a majority stake in Chinese e-commerce firm Yihaodian to JD.com, China's second biggest online company.

“I think we’ve got some cool ideas on how the two brands can work over time,” said Doug McMillon, president and chief executive officer of Wal-Mart, in a conference call with Wall Street analysts. “Marc has focused Jet.com [on] higher income shoppers than the mean of walmart.com consumers. That’s not to say that we don’t have a lot of Millennials, but Jet has been able to attract brands we don’t have at walmart.com.…We’ll keep the spirit of the brands independent and leverage some things on the back-end. The essence of brands will continue to be different over time.”

Photo 1: Walmart, Newsroom, Walmart.com
Photo 2: Jet.com, Facebook

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