Why Wal-Mart Had to Buy Jet to Compete with Amazon
August 8, 2016 | Contributed by: Greg Sterling
Undoubtedly you’ve read that Wal-Mart is buying startup (and would-be Amazon killer) Jet.com for a whopping $3 billion. The strategy is simple at the highest level: buy an entity that will make Wal-Mart more competitive with Amazon online.
According to various reports, e-commerce represents less than 3% of Wal-Mart’s roughly $480 billion in revenue. Wal-Mart intends to keep the Jet brand, which is part of the point here.
Despite the fact that Wal-Mart is second only to Amazon in traffic to e-commerce sites, it badly lags Amazon in every respect otherwise. Amazon’s revenues exceeded $100 billion last year. And the company’s Prime and Prime Now programs constitute a powerful threat to traditional retail.
The acquisition of Jet can be seen as some or all of the following:
- A talent acquisition (Jet CEO Marc Lore and other top executives will remain)
- The purchase of an e-commerce infrastructure
- The purchase of a new albeit nascent brand (to attract new audiences)
Jet’s infrastructure and expertise will also be used to boost Wal-Mart.com. But what’s most interesting to me is that the acquisition is something of an admission of failure (vs. Amazon and against internal growth targets) and an acknowledgement of the limitations of the Wal-Mart brand.
Perhaps the biggest obstacle to Wal-Mart’s e-commerce success is the brand itself, which has massive recognition but uneven appeal to different audience segments.
Traditional retail must address the “omnichannel imperative.” However its greatest weapons are stores and human customer service. Unfortunately most traditional retailers are doing a mediocre job and haven’t fully embraced the mobile and location tools and technology that can make the store experience more compelling.
Join us at the Place Conference in Chicago (September 21) as we explore Using Location Intelligence to Beat Amazon:
Stores still account for 92% of all retail sales yet there’s an unmistakable feeling of gloom in the industry. How can retailers use proximity, data, personalization and indoor location to improve the customer experience, loyalty and sales?