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Tuesday, May 19, 2020

Jet.com -- To Crash And Burn At Walmart -- May 19, 2020

Jet crash: Walmart to discontinue Jet; acquired in 2016 for $3 billion. From August 17, 2017:
This is a clear signal of how Walmart.com and Jet.com will diverge. While Walmart is a mass-market retailer that appeals to every demographic, Jet will be geared toward the urban millennial customer.
The difference in strategies is starkly illustrated by viewing the homepages for the two e-commerce websites. [I assume this home page will disappear, but I don't know. The article did not make that clear.]
Back on August 3, 2018:
At businessinsider: Walmart proved in 2017 it was still the king of retail.
The retailer launched more online initiatives than can be quickly summarized. It partnered with Google on voice shopping, opened its thousandth grocery pickup location, took advantage of its huge footprint of stores for easy online returns, introduced free two-day shipping with every $35 order, and even launched a pilot program to deliver fresh groceries right into customers' refrigerators.
Recent acquisitions, like the 2016 purchase of Jet.com for $3.3 billion, started to pay off as it became more clear how they would fit into Walmart's strategy. These initiatives were good for 40 to 50% e-commerce growth by the end of the year — a staggering percentage for a retailer of Walmart's size, though it does not break out individual numbers for online sales.
From today's linked story:
So much for Walmart's big and expensive effort to take on Amazon with a digitally-native brand. Amid the coronavirus crisis and its impact on the retail industry, today the retail giant quietly announced in its quarterly report that it would be discontinuing Jet.com, the online-only marketplace that it acquired when it was just over one year old for $3 billion (plus $300 million in earn-outs over time), as it struggles to bring its e-commerce operations into that black after reportedly seeing a loss of $2 billion in the division in 2019 and shifting how to deliver its e-commerce strategy: by betting on giant stores, rather than online warehouses, as the hubs of its online delivery model.

Jet.com ... saw growth of less than 10% in Walmort's core US market ... Walmart said that it would be withdrawing guidance for fiscal 2021. ["Core US market"? Did the goalposts move? Jet.com was aimed at a different demographic than the "core Walmart" demographic.]

The news of Jet.com's discontinuation is in equal parts a surprise if probably expected by those who have been watching its progress. Surprise, because the continued impact of COVID-19 has led to a surge of people shopping online -- Walmart itself notes that e-commerce sales were up 74% in the quarter, including store pickup and delivery, ship to home, ship from store and marketplace channels -- and so it would seem that Walmart might have wanted to double down on its own online efforts.
Expected, because in reality Jet.com hasn't shaped up to be the jewel in the crown that Walmart had hoped it would become, going through a number of restructuring attempts over the years as e-commerce overall continued to bleed red.
Again, most interesting are the social media comments at the linked story. My takeaway: it's hard to beat Amazon at its own game. 

By the way, Amazon bought Whole Foods in 2017.

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