Walmart buys Amazon rival Jet.com for $3.3bn

09/08/2016

Retail giant Walmart has bought online retailer Jet.com for $3.3bn (£2.5bn), one of Amazon’s biggest online challengers, in a major statement of intent from the superstore giant.

The move is seen as Walmart’s latest attempt to tackle the widening gap between Amazon and its own ecommerce business.

Jet.com launched just one year ago, pitching itself as a low-price online retailer. It currently operates at a loss.

Walmart generated $482bn in sales last year, but the vast majority of this was in traditional bricks-and-mortar retailing. By comparison, the firm’s online revenues were just $13.7bn, compared to $99bn for Amazon’s retail business.

Walmart’s market capitalisation, meanwhile, was surpassed by Amazon last year and is now less than two-thirds of its younger rival.

Jet, which was founded just two years ago and did not launch a website until July last year, has been seen as one of the few internet retailers capable of stymieing Amazon’s dominance of internet shopping.

By offering heavy discounts on bulk orders, which save on shipping costs, the upstart has claimed to undercut Amazon in many areas as well as encourage high-volume shopping on its own site.

It has grown to around 3.6m shoppers in the US, although it is heavily loss-making having spent millions on marketing, and was believed to be looking for more cash despite having raised hundreds of millions in recent months.

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Jet is led by Marc Lore, an internet commerce entrepreneur who sold his last company Quidsi, which owned Diapers.com and Soap.com, to Amazon for $545m in 2010.

Owning an estimate 25% of Jet, he stands to make around $750m from the sale. Walmart will pay $3bn in cash and then $300m in shares over time, with the deal ranking as the biggest takeover of a US e-commerce company. Other investors had included Google’s venture capital arm and Alibaba.

Lore will continue to run Jet.com, which will maintain its status as an independent website, but also take over Walmart’s online operations. The supermarket’s website is set to introduce Jet’s technology, while being under Walmart’s umbrella will allow the startup to lose money for longer.

Walmart is believed to have insisted that Lore remain at the combined company for several years as part of the deal.

“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 Walmart’s chief executive Doug McMillon.

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