The acquisition was confirmed on Monday — retail giant Walmart has purchased Jet.com for a cool sum of $3.3 billion.
Walmart has been trying to carve itself out as a legitimate competitor to Amazon for some time now. They relaunched their online marketplace last year, trying to push more forcefully into the fast-moving world of online shopping. More recently, they directly responded to Amazon’s Prime Day by offering free shipping a week ahead of the event, as well as a number of deals on Prime Day itself.
This deal is the newest part of Walmart’s strategy to compete with Amazon, and it’s their most aggressive push into Amazon’s territory yet. As a result, a lot of Amazon sellers are asking what this deal means for them. Don’t worry — we have answers.
For Amazon sellers: not much.
Amazon has been the dominant online marketplace for a long time, and that fact shouldn’t change in the foreseeable future. Amazon and Walmart started out with very different focuses, and Walmart has found it difficult to pivot hard enough to find the same success as an online marketplace that Amazon did. Even as Walmart has been making more and more concentrated efforts, Amazon’s dominance has actually grown — they increased their share of US online retail sales from 25% in 2012 to 33% in 2015.
Walmart needed to make this wager to stand a chance at competing against Amazon. We’ll see if it pays off.
As for Jet itself — they made a fairly big stir in July of last year with huge amounts of promotion leading up to their launch. They grew fairly quickly right out of the gate, and they offer a number of distinguishing features over Amazon. Most notable of these features: their Smart Cart, which actively lowers your checkout price as you add items to your cart that can be packed and shipped from the same warehouse.
Despite the $200 million Jet had raised before selling a single product, they began quickly burning through their funds due to aggressive marketing and hiring tactics. They eventually dropped their $50 monthly membership fee, a pricing plan which was causing them to lose money on every shipment, in order to attract new customers.
Jet has a lot of good ideas, and it’s headed by the visionary entrepreneur Marc Lore, founder of Quidsi and its subsidiaries, Diapers.com and Soap.com. However, Jet just didn’t have the revenue stream to make its name as an online marketplace, and as such, they didn’t become the true competitor to Amazon that many thought they would be. With the Walmart acquisition, though, that might change. Jet always had a lot of potential, and with more capital backing them, they may be able to live up to that potential.
To go back to the issue at hand, however — private label Amazon sellers don’t have much to worry about. Amazon customers will not be jumping ship by the millions any time soon — Amazon still fills a unique sector of the online market, especially with the popularity of Amazon Prime. A company this large, successful, and implanted in the mind of consumers won’t be going anywhere. Some competition is inevitable, and even healthy.
In terms of Amazon’s response to this acquisition, don’t hold your breath for any drastic actions on the part of Jeff Bezos. Amazon tends not to make huge shifts in strategy in response to competition, preferring instead to stick to its core mission and keep plowing ahead with what's working.
If anything, the deal may open new opportunities for private label sellers. Diversification is always a good idea, but prior to this acquisition, we would have been hard-pressed to recommend Jet as a sales channel over the alternatives. Now, however, Jet holds a lot of promise. Stay tuned over the coming months — based on Jet’s performance under Walmart, you may decide that expanding your business in that direction makes sense.
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