Update, 08/08: Walmart has now confirmed this acquisition.
Jet.com will reportedly be acquired by Walmart in a deal said to be worth $3 billion, the culmination of rumors that first made waves last week. Under terms of the deal, Jet cofounder and CEO Marc Lore will remain at his post and will helm Walmart’s U.S. ecommerce operations. Lore is said to be replacing Walmart’s Neil Ashe, who will be departing “after a transitional period.”
Launched in 2015, Jet aimed to take on Amazon, Walmart, and other online retail giants by offering a new spin on the shopping club. Early on, its strategy included taking orders from customers on goods that it didn’t carry and facilitating the transaction with stores and sites that did. Months after it launched, Jet eliminated its $50 annual membership fee, shifting the company’s business model toward gaining profit from items sold.
Until that point, membership fees had been Jet’s main source of revenue, since it sold items to customers at a steeply discounted price. However, once the fees where dropped, Lore explained that the company modified the discount percentage: “It turns out 4 to 5 percent is enough of a discount for shoppers,” he said.
The acquisition of Jet will hopefully invigorate Walmart’s ecommerce operations and help it challenge Amazon and other online retailers. Long-time corporations are always hungry for ways to remain competitive as more digitally savvy businesses take money and market share away from them. Jet’s integration into Walmart will surely offer Walmart the resources needed to grow its brand, especially since Walmart is already the second-largest U.S. ecommerce retailer, behind Amazon.
In its attempts to rival Amazon, Walmart has tried a variety of things, including making acquisitions through its innovation center. Through Walmart Labs, the retail giant has acquired the point-of-sale startup Grabble, iPhone app agency Small Society, big data startup Inkiru, and site performance service Torbit. Earlier this year, the division was merged with Walmart’s information systems team to streamline things and boost Walmart’s ecommerce offerings.
It’s said that the Jet’s appeal lies primarily in its technology stack. Recode cites Jet’s capability to identify orders that should be routed to the appropriate vendors in real time, which helps keep costs low and facilitate discounts on larger orders.
The deal is still based on reports, but it is expected to be formally announced on Monday. Should it go through, it’ll rival the most recent ecommerce acquisition, in which Dollar Shave Club was bought by Unilever for $1 billion. To date, online discount seller Zulily is the most expensive retail acquisition on record, having been picked up by QVC parent company Liberty for $2.4 billion in 2015.
Lore has extensive experience in online retail, having cofounded Diapers.com before selling it to Amazon for $550 million. He got back in the game to take on Amazon and amassed quite a bit of venture capital to fund his ambitions — picking up more than $565 million from investors like Accel, Bain Capital Ventures, Fidelity Investments, Forerunner Ventures, General Catalyst Partners, GV, Goldman Sachs, Alibaba Capital Partners, New Enterprise Associates (NEA), and Norwest Venture Partners.