As Walmart struggles with slumping sales, the company may be in talks to buy Jet.com, the ambitious e-commerce startup launched last year.
The potential deal is valued at up to $3 billion, though Jet is valued at less than half that, according to a Wednesday report in The Wall Street Journal. Acquiring Jet would spur Walmart’s online efforts as it tries to catch up to online retail behemoth Amazon.
Walmart declined to comment on this story. Jet did not respond to requests for a statement.
Walmart spent $3.8 billion over the past year to boost sales, particularly online, as its overall sales failed to grow for the first time in 46 years. In May, the retail giant reported quarterly e-commerce sales growth at just 7 percent, down from 17 percent in the same time period last year. Compare that to Amazon’s 31 percent sales growth in the last quarter, up from 20 percent a year earlier.
In other words, Walmart has a long way to go before it can challenge Amazon online. But Jet could help. The New Jersey-based startup has seen impressive growth since its July 2015 launch. Between September and December, average monthly sales grew by 28 percent, according to a white paper from the research firm Slice Intelligence.
Jet’s possible acquisition by Walmart drew criticism from some who see selling it barely a year after launch as a bailout to make investors whole before the company falters. In its report, The Wall Street Journal noted that a sale “would mark a disappointing end to one of the most ambitious challengers to Amazon.”
Jet set out last year to tackle Amazon by channeling Costco’s membership model and tweaking its delivery system to beat the e-commerce juggernaut with cheaper prices. By pulling in revenue through membership fees and pairing customers with the cheapest possible shipping methods, Jet said it could drastically lower prices.
In October, three months after its launch, Jet dropped its $50 annual membership fee and kicked off an aggressive advertising campaign in hopes of luring more shoppers. The startup claimed it could keep prices low by subsidizing them with sales commissions it collected from third-party merchants on the site.
The site billed itself as a destination for shoppers buying home goods in bulk. In that sense, it worked. Buying laundry detergent, paper towels, toothpaste and coffee cost much less on Jet than Amazon, according to a report by Money magazine, which estimated monthly shoppers could save up to $500 a year.
Yet, Jet’s sales still represent less than 1 percent of Amazon’s sales. And integrating the company with Walmart may not be easy.
For years, Walmart’s technology efforts were fractured, with one team at the headquarters in Bentonville, Arkansas, and the more experimental @WalmartLabs at a chic Silicon Valley office in San Bruno, California. In January, the company moved to combine the teams, creating a new unit called Walmart Technology, with about 8,000 workers.
It’s unclear whether Walmart would keep Jet as a standalone site, or if it would integrate the company’s complex back-end technology into its own Walmart.com.