Walmart is reportedly looking to acquire scrappy Amazon competitor

It sells things, and buys things too.
It sells things, and buys things too.
Image: Reuters/Mike Blake
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Walmart is in talks to buy, an online retailer that aimed to take on Amazon, the Wall Street Journal reported today. The deal could value Jet at up to $3 billion, a source told the Journal. Neither Walmart nor Jet could be immediately reached for comment.

Were Walmart to buy Jet, it would be the latest sign of a shakeout among e-commerce startups. In June, Bed Bath & Beyond acquired flash-sales site One Kings Lane, a company valued at $900 million just two years earlier, for a “not material” price. Gilt Groupe, another flash sales site and one-time “unicorn” with a $1 billion valuation, sold to Saks Fifth Avenue owner Hudson’s Bay in January for $250 million. Birchbox, a subscription beauty products retailer, laid off 30 employees in late June after cutting 50 positions earlier in the year. Industry-wide, funding to e-commerce startups is on track for its worst year since 2012, according to venture-capital research firm CB Insights.

Jet launched in July 2015 with a $600 million valuation and a flurry of media interest. The company’s CEO, Marc Lore, made his name selling Quidsi, the parent of and other niche e-commerce sites, to Amazon for $545 million in 2010. Within a few months of starting up, Jet attracted another $500 million from investors that valued it at more than $1 billion.

Unlike Amazon, which has invested in a network of highly efficient warehouses, the vast majority of Jet’s inventory is sold by retailers who themselves ship the goods directly to customers, what Jet calls a “hybrid marketplace model.” Of the 12 million different products Jet said it offered as of this month, only 75,000 are sold out of Jet’s three US warehouses. Jet says it takes a commission of 8% to 16% from merchants on most sales.

Acquiring Jet would help Walmart shore up its defenses against Amazon, which continues to decimate sales for traditional brick-and-mortar retailers. Walmart arrived late to the online-shopping game and has struggled to catch up ever since. It has piloted various free-shipping programs, most recently announcing a $49-a-year “ShippingPass” for unlimited two-day deliveries. Walmart is also testing partnerships with Uber and Lyft to deliver online grocery orders from its stores in three US cities.

Jet, which recently celebrated its first birthday, has tried to woo consumers with something it has branded “smart cart” technology. The basic idea is that when customers shop for multiple items, Jet identifies which merchant (or merchants) the customer should order from to get the lowest price, based on factors such as packaging and shipping.

Initially, Jet intended to charge users a $50-a-year membership fee, in a play similar to Amazon Prime. But it scrapped those plans last October, just a few months after its launch. Jet explained the abrupt pivot by saying better-than-expected consumer interest in its platform made a subscription model unnecessary.

“We actually never got to the point of charging a membership fee,” Jet’s chief customer officer Liza Landsman told Quartz last week. “We launched with a free trial period. We quickly saw people were adapting to the real-time dynamic pricing and felt we didn’t need to levy the fee to get the savings rate for consumers that we thought was attractive to them.”

Analysts were more critical, with one noting that Jet was “just trying to get a huge number of customers and [would] figure out revenue opportunities later.”