Why Did Walmart Snag Jet.com? News Roundtable with Ari Levy (CNBC) and Rolfe Winkler (WSJ)

TL;DR

Walmart pursued Jet.com because its online business remained far behind Amazon and needed an accomplished e-commerce leader and stronger technology platform. The discussion compares Walmart’s roughly $14 billion in annual online sales with Amazon’s approximately $30 billion in one quarter, while examining Jet’s heavy cash needs and $40 million monthly burn rate. Read on for the deal’s strategic and financial context.

Transcript

yeah they think the obvious argument is that was desperation on wal-mart's part I mean a company that Walmart cons been around since 2000 has never bridged the gap with Amazon it's been the number two player and e-commerce by default just when you're as big as Walmart and you do a portion of your revenue online you're going to be the second biggest... Read More

Key Insights

• 🍉 Walmart is significantly smaller than Amazon in terms of e-commerce sales.
• 🤩 The company missed opportunities to acquire key players in the e-commerce market.
• 👨‍💼 Walmart is in need of an experienced e-commerce leader to drive its online business.
• 😀 Their approach to e-commerce differs from Amazon's, focusing more on internal development rather than acquisitions.

Questions & Answers

Q: Why did Walmart pursue Jet.com to catch up with Amazon?

Walmart had operated online since 2000 but had never bridged the gap with Amazon. The speakers argue that Walmart needed both a stronger technology platform and a highly accomplished e-commerce leader to build and run the business.

Q: How far behind Amazon was Walmart in e-commerce sales?

The discussion cites roughly $14 billion in annual online sales for Walmart, compared with approximately $30 billion for Amazon in one quarter. Another comparison presented Walmart as about one-eighth the size of Amazon in e-commerce.

Q: What earlier e-commerce opportunity did Walmart miss?

Walmart missed the opportunity involving Diapers.com and Quidsi around six years earlier. Amazon ultimately acquired Quidsi after threatening to drive diaper prices down to zero, according to the discussion.

Q: Why was Mark Lori important to Walmart’s e-commerce strategy?

Mark Lori is described as one of the few accomplished executives who had competed with Amazon, worked for Amazon, and then competed with it again. The speakers viewed his experience and ability to raise substantial funding quickly as evidence that he could help build and run Walmart’s online business.

Q: Was Jet.com also under financial pressure?

Yes. Jet.com was expected to require much more capital, while funding markets had become less favorable for companies losing large amounts of money. The speakers question whether enough cash would remain available to keep the company operating.

Q: How much capital did Jet.com expect to raise?

An investor presentation from the previous summer projected that Jet.com would need to raise $3 billion by 2020. The company had already raised substantial capital, but the speakers said it was nowhere close to that total.

Q: When did Jet.com expect to reach profitable scale?

Jet.com’s target was to reach sufficient scale for a profitable position by 2020. Until then, the business was expected to need continuing infusions of cash.

Q: How quickly was Jet.com spending money?

The financials discussed showed Jet.com burning $40 million per month during the previous fall. Of that spending, $25 million went to marketing, including Google ads and product listing ads displayed near the top of search results.

Summary & Key Takeaways

• Walmart has been the number two player in e-commerce by default, but is significantly smaller than Amazon in terms of sales.

• Walmart missed the opportunity to acquire companies like Diapers.com and Jet.com, ultimately losing them to Amazon.

• Walmart is in desperate need of a knowledgeable and experienced e-commerce leader to build and run its online business.