Wal-Mart has long unicorn ride in Amazon chase

August 4, 2016

The author is a Reuters Breakingviews columnist. The opinions expressed are her own. 

Wal-Mart may be trying to hasten its pursuit of Amazon by riding a unicorn. The U.S. retail titan is in talks to buy Jet.com, a fledgling online-shopping site, according to the Wall Street Journal. It would fit into a bigger plan to beef up its lackluster digital and e-commerce efforts. Amazon, meanwhile, keeps moving ahead with offerings such as one-day shipping and groceries.

Doug McMillon, Wal-Mart Stores’ boss, has no illusions about how his company is faring on the web. “Growth here is too slow,” he said in May. Online sales clocked in at about $14 billion last year, barely 3 percent of Wal-Mart’s top line. Amazon by comparison reported a revenue increase of about one-fifth in 2015 to $100 billion, excluding web services. It also was about a year ago that Amazon charged past Wal-Mart in terms of market value. At $350 billion, it is now 60 percent larger.

Wal-Mart lags in other areas, too. Its marketplace that allows consumers to sell their products next to Wal-Mart’s own has over 10 million items. Amazon counts 200 million, according to Jefferies. What’s more, Amazon is eyeing turf claimed by Wal-Mart. It recently expanded the markets in which it delivers fresh food such as milk and produce.

Given Wal-Mart’s ambitions, Jet understandably makes for a tempting target. Founder Marc Lore also helped start the company behind Diapers.com, which Amazon bought in 2010. Launched just last year, Jet has been struggling to challenge its larger online rival. The business model already was changed. Jet first required a $50 annual membership fee, in a bid to mimic the successful Costco structure online. It dropped the idea, however, and turned its attention to other ways to generate revenue instead.

Wal-Mart has been rapidly gulping down startups over the past couple of years, including recipe and meal-planning service Yumprint and advertising-tech firm Adchemy. Jet would be a bigger bite. It has raised more than $500 million and is valued at over $1 billion. Wal-Mart can afford to buy as it builds, but even a galloping unicorn – and there’s no sign Jet is yet such a beast – will struggle to tow the lumbering retailer into a competitive position online.

2 comments

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Well, yes. Maybe. When I lived in Tribeca, I bought more stuff from Amazon than I do now. When I retired, moved to the country (trust me, NY’s “Capital District” is freaking rural, right out of a Thomas Hardy novel), I bought a fair amount of stuff through Amazon (never books, though…).

Then I discovered Walmart. I had never been in Walmart — had avoided such places, generally. Now, I have two more or less in the ‘hood (ten minutes away) from which to choose — big and bigger. And the assortment of merchandise is thrilling. And I don’t have to worry about Amazon’s fast-only-at-extra-cost fulfillment system. Good grocery store (Walmart stocks red currant jelly, of which I am inordinately fond; most places don’t). I can get a pair of jeans, then hit the auto parts area or the small-electronics area, do some grocery shopping — while my wife is stocking up on stuff for her current hobby and getting stuff from the pharmacy. One trip, less time wasted.

The only real problem: I do tend to lose track of my wife in such a large place — and she is not good at answering her mobile phone….

Posted by RRassendyll | Report as abusive

Walmart’s only hurtle to online sales is a dysfunctional and outmoded consumer front end. They have the prices and selection to compete. They even have same day pick-up which Amazon will never have. The problem is Walmart’s entire technology is actually a barrier between the consumer and inventory. Walmart has never been a tech savvy company and they refuse to get the talent necessary to fix the problem. It’s a lack of market and consumer experience awareness.

Posted by DanielPayne | Report as abusive