Wal-Mart to buy Jet.com to beef up e-commerce

Wal-Mart Stores Inc. said on Monday it will buy online retailer Jet.com for about $3 billion, the largest-ever deal for an e-commerce startup, as it races to build a Web business to better compete with Amazon.com Inc.

Wal-Mart’s online business has struggled, posting its slowest growth in a year in the latest quarter, and the Jet deal reflected management’s eagerness to prioritize online growth.

Wal-Mart, the world’s largest retailer, said it would pay about $3b. in cash for Jet, part of which will be paid over time. It will also pay an additional $300 million in shares over time.

The purchase comes after Wal-Mart said in June it sold a majority stake in Chinese e-commerce firm Yihaodian to JD.com Inc., which is China’s second-largest e-commerce company.

Wal-Mart’s sales in the online unit were $13.7b. in 2015, according to research firm Internet Retailer.

“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,” Wal-Mart chief executive officer Doug McMillon said in a statement.

Jet.com was launched by Marc Lore in July last year. Its initial strategy was to offer large discounts and the lowest prices on items based on a pricing formula that took into account factors such as the number of items customers added to their shopping cart for an annual $50 fee.

But three months after launch, Jet changed strategy and eliminated its subscription model.

While Wal-Mart and Jet will maintain distinct brands, they will leverage technology from both companies to develop new offerings, Wal-Mart said. (Reuters)