When Jet.com launched in 2015, it knew it was going to take a lot of initiative to play David to Amazon’s Goliath. Initiative—and more than a little bravado.
It’s not that there wasn’t a market for it. On the contrary, there was a perfect market. A young market. A city-dwelling market. And a market raised on digital delivery. What it didn’t have was Amazon’s name and reputation to stand on.
In the shifting landscape of eCommerce, name and reputation can be bedrock. It made sense that a retail giant like Walmart—which had failed to make significant headway in online retail up until that point—would seek to strengthen its digital commerce outreach by acquiring Jet.com for $3.3 billion barely a year after its launch. At the time, a Walmart spokesperson was quoted as saying the acquisition would produce “potential synergies in product cost, shipping, fulfillment and integration of technology platforms.”
And synergize it did. Earlier this month, Walmart announced it would discontinue the Jet.com brand. "Due to continued strength of the Walmart.com brand, the company will discontinue Jet.com," Walmart stated in a quarterly earnings release. "The acquisition of Jet.com nearly four years ago was critical to accelerating our omni strategy."
That’s great for Walmart’s omni strategy. But what does it mean for your business?
A Tale Of Two Cultures?
Walmart may have historically touted itself by offering rock bottom pricing on everyday items, both online and in-store. What that has primarily meant, however, has been a focus on well-established brands; often at the expense of smaller companies and individual sellers.
Jet.com offered the same price advantage as Walmart with one particular difference: it was willing to embrace both smaller businesses as well as name brands. Not only that, its primary demographic was decidedly younger, more affluent and urban-dwelling. That doesn’t mean you won’t find a millennial audience shopping at Walmart. It simply meant that a consumer base historically raised on digital commerce would likely be more receptive to a retailer born out of the eCommerce boom than a retailer whose roots were firmly planted in the soil of brick and mortar commerce.
Does Walmart Have An Advantage?
The acquisition of Jet.com was intended to be an entrance for a younger audience to reevaluate Walmart’s strengths. But due to much smaller operations, Jet was also known for slower and occasionally inconsistent fulfillment times and fees. Perhaps most significantly, a policy which mandated orders in the Continental U.S. only.
But name recognition stands for a lot in online retail. So much so that Walmart actually saw a 37 percent increase in online sales for the first quarter of 2019, dwarfing even Amazon’s reported 10 percent. Jet’s entire revenue for 2019 was reportedly $689 million; a far cry from the initial forecast of $1 billion.
Walmart’s online storefront may be known for providing positively seamless transactions, with low fees and prompt delivery times. And similar to Amazon FBA, they operate their own online fulfillment centers. There’s just one critical advantage for consumers and a critical disadvantage for merchants with WalMart Marketplace: free returns are accepted both online and physically in-store.
Has The ECommerce Playing Field Really Narrowed That Much?
We’re kind of sad to see Jet.com go, actually. And it’s not just because we believe that multi-channel fulfillment can enable success. We think Jet filled a void. They had a key demographic, competitive prices and a seller friendly business model.
But they also had limited exposure. They lacked the operational strengths that digital retailers like Amazon and Walmart Marketplace have historically provided. And now that their own strengths have been fully integrated into Walmart’s online culture, we can only hope the lessons learned by both companies can create a more nuanced eCommerce model.
Color More Lines provides white glove, global account management of your ecommerce platforms so mission-driven companies can focus on new product development, branding and growth strategies. Find out more at Color More Lines.