Wal-Mart In Talks To Purchase Online Discount Retailer Jet.com

Wal-Mart Stores Inc., in an effort to compete with Amazon.com, is currently in talks with Jet.com Inc., an online discount retailer. That’s according to sources close to the matter. The Jet.com deal would help Wal-Mart in its e-commerce efforts, as it looks to go beyond its brick-and-mortar buildings and more.

How much money is Wal-Mart willing to pay for the unprofitable startup?

Sources close to the issue said Jet might have a value of close to $3 billion, which would be the company’s largest acquisition since it purchased Massmart Holdings Ltd. in 2010 for $2.3 billion. Paying big dollars for these companies is a sign that Wal-Mart is doing everything it can to catch up with Amazon.

Bryan Gildenberg, a Kantar Retail analyst, said Wal-Mart could use the energy. But, he’s confused as to why it would purchase the business model for that amount of money.

Jet is not even a year old and has looked to underprice Amazon, which would need billions of dollars and plans to rely on suppliers instead of warehouse inventory. Some of Jet.com’s growth strategy included relying on taking products orders that it did not sell and placing orders for some of its customers. It would often sell items below the price paid while taking the hit for shipping costs.

The company ended the practice.

Wal-Mart, based in Bentonville, Ark., is trying to keep up with Amazon. Amazon surpassed Wal-Mart a year ago with a 50 percent larger market value. Wal-Mart’s e-commerce sales have come close to $14 billion. Amazon had $107 billion revenue in 2015.

In order to compete, Wal-Mart pushed $2 billion toward e-commerce, in the hopes to increase its sales, support the two-day free shipping service and creating new fulfillment centers. It’s also tried to increase sales with curbside pickup and local grocery delivery services.

However, it’s online growth has gradually slowed down nine straight quarters.

If Wal-Mart does purchase Jet.com, the retailer will attain its pricing software along with customer information and warehouses. It would also attain a brand that appeals to higher-income shoppers – a demographic Wal-Mart has had problems appealing to.

 

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