Wal-Mart gulps down startups in Amazon chase


  • Retail
  • Monday, 08 Aug 2016

Wal-Mart may be the world’s largest brick-and-mortar retailer by quite a margin, but if the future is online, then it may be in trouble, hence its latest talks to acquire e-commerce startup Jet.com.

WAL-MART may be trying to hasten its pursuit of Amazon by riding a unicorn, with the US retail titan 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 lacklustre 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 US$14bil last year, barely 3% of Wal-Mart’s top line. Amazon, by comparison, reported a revenue increase of about one-fifth in 2015 to US$100bil, excluding web services.

It was about a year ago that Amazon charged past Wal-Mart in terms of market value. At US$350bil, it is now 60% larger.

Wal-Mart lags in other areas, too. Its marketplace, which allows consumers to sell their products next to Wal-Mart’s own, has over 10 million items. Amazon counts 200 million, according to investment bank 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 US$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.

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 US$500mil and is valued at over US$1bil.

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. — Reuters

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