Wal-Mart eyes e-commerce startup

Retailer sees Jet.com as a route to improve its online business

Wal-Mart is reportedly in talks to acquire the discount e-commerce startup Jet.com in an effort to ramp up its struggling online retailing business and compete with Amazon.com.

A deal for the 1-year-old company could be valued at up to $3 billion, the Wall Street Journal reported this week, citing people familiar with the matter.

Acquiring Jet.com could give the big-box retailer’s online strategy a much needed boost, providing access to the technology and supply-chain innovation that has enabled the startup’s rapid growth.

Capturing a larger slice of the e-commerce pie is vital as consumers increasingly turn online to online rather than in bricks-andmortar stores.

“Wal-Mart’s e-commerce growth has been slow — they have had a yearover-year decline when the overall market is still growing,” said Michelle Malison, a retail analyst with Euromonitor International. “What Wal-Mart has been doing for their e-commerce business is not resonating with consumers.”

Wal-Mart dominates U.S. store-based retailing, with a 13 percent market share, though it ranks fourth in e-commerce, with 3 percent, Malison said. Amazon.com holds 31 percent of the online shopping market, she said.

Wal-Mart Stores in May reported a 7 percent increase in global e-commerce sales in its fiscal first quarter, weaker than the 8 percent in the previous quarter and far below the 20 percent increases seen less than two years ago.

By pursuing Jet.com, “Wal-Mart is trying to short-circuit the learning curve,” said Britt Beemer, founder of America’s Research Group.

“If these guys that come in can help Wal-Mart double their internet sales in one or two years, whatever the acquisition costs are, are minimal in comparison to what they’ll make in profits,” he said.

According to Malison, Jet.com has said it’s on track to have a year with $1 billion in sales, with 4 million shoppers on its platform. Sales grew an average of 28 percent per month from September through February, according to Slice Intelligence. The Hoboken, N.J., company is not yet profitable.

Jet.com appeals to the cost-conscious consumer. It uses pricing software that calculates in real-time the most efficient way to fulfill a customer’s order and then passes those savings on to them.

The startup would help Wal-Mart “figure out how to reinvent the supply chain to deliver value to its customers, all while offering two-day delivery without an additional delivery fee,” Malison said.

Jet.com has raised $500 million in venture capital, but would need far more funding to seriously vie for the No. 2 e-commerce spot behind Amazon.

“They know they can’t do it themselves,” Beemer said.

Analysts see the upside in Jet.com, but some are surprised that either company is entertaining a sale so soon.

“If these guys that come in can help Wal-Mart double their internet sales in one or two years, whatever the acquisition costs are, are minimal in comparison to what they’ll make in profits.” — Britt Beemer, founder, America’s Research Group