Earlier today we learned that Walmart Inc. is purchasing e-commerce startup Jet.com for $3.3 billion. One of the stipulations for the deal is that Jet.com founder Marc Lore would stay on to run Walmart’s online retailer division.
When Jet.com was launched in 2015 the company was said to be the Amazon killer. While that hasn’t quite happened, the company has witnessed serious growth in a short period of time. Jet.com reported over $15 billion in sales during 2015, which was slightly ahead of the $14 billion reported by Walmart’s online division, but well behind the $99 billion that Amazon.com made from products and services.
The growth by Jet.com came at a cost. The company spent over $20 million in marketing expenses in order to position itself as a rival of Amazon.
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So what does this deal mean for Walmart? It means they are serious about not only fighting off attempts from Amazon to dominate the market, but they want to cut into some of Amazon’s market share.
According to Sucharita Mulpuru, an analyst at Forrester Research Inc. Marc Lore is one of the smartest people in e-commerce. “Wal-Mart still struggles with things like third party marketplaces which Marc and his team have successfully built.”
Jet.com isn’t the first e-commerce company that Lore has successfully grown. In 2010 he sold Quidsi to Amazon for $545 million. Quidsi was the parent company of Diapers.com, Soap.com, and Beauty.com.
Not only does this deal give Lore deeper pockets to go head-to-head with Amazon, but it gives Walmart an experienced e-commerce veteran. Walmart has spent million of dollar over the past several years to boost their e-commerce division. They have opened offices in Silicon Valley, built e-commerce distribution centers, and hired thousands of new employees.
While this deal looks like a great match for both Lore and for Walmart, only time will tell whether the two can successfully hold off Amazon and cut into their growing e-commerce dominance.
