How Jet.com fits into Walmart's plans to beat Amazon

8 months ago by Jeremy Bloom in Features

Two giants of commerce are battling for the top retail spot: Walmart and Amazon. Walmart is the global leader in brick-and-mortar sales, while Amazon is the undisputed master of e-commerce. But e-commerce is the wave of the future (bye-bye, Toys R Us), and Walmart is moving in on Amazon's digital turf.

How's that going for them? Since it acquired Jet.com in September of 2016, Walmart has been surging:

Note: Walmart doesn't release dollar values for its e-commerce sales, just year-over-year percentage increases. Why? As of November 2017, more than a year after the Jet acquistion, e-commerce still only amounted to 3% of Walmart's revenue. 60% growth sounds much more impressive than the hard numbers would.

While Walmart insists that last year's growth was organic, it's pretty apparent that Jet.com played a critical role. How can we tell? Just look at where the surge happens:

  • Q3 2016 (before Jet.com revenue) to Q3 2017 (which included the boost from Jet.com): 50% growth
  • Q4 2016 (first Jet.com acquisition quarter) to Q4 2017 (first Q to Q comparison where both include Jet.com): just 23% growth

Acquiring Jet.com gave them a nice bulge like a pig going through an anaconda, but now that's passed through the system. Walmart finished 2017 with an overall 40% growth in e-commerce, with at least half of that boost directly attributable to Jet.com. Walmart isn't done with its image M&A plans, either: It also picked up a handful of other young, hip, urban e-commerce sites -  Bonobo, ShoeBuy, Moosejaw and Modcloth - that it plans to roll into Jet.com. 

Pixels to bricks and back again

In the summer of 2016, Walmart's overall sales were flat, and its digitial operation was growing at a glacial pace -  eMarketer said Walmart had only reached $12.5 billion in online sales, vs $82.8 billion for Amazon. And while the big box empire remained at the top of the heap in overall retail sales, MKM Partners analyst Rob Sanderson reported that Amazon could pass them in overall sales by 2020, even without a brick-and-mortar footprint. And with its acquisition of high-end grocery chain Whole Foods, Amazon now has a brick-and-mortar presence, too.

Under the circumstances, it's understandable Walmart would have looked at somebody doing digital right - Jet.com hit $1 billion in sales in May of 2016, barely a year after launching, and Walmart had snapped them up by September.

First leads to the first small problem - while nearly everyone on the planet is familiar with the Walmart and Amazon brands, and most in the US are familiar with Whole Foods, Jet.com doesn't have anywhere near that kind of name recognition And a billion dollars in sales is great for a boutique e-marketer aimed at urban millennials, but it's a drop in the bucket compared to Amazon's $180 billion or Walmart's $500 billion in annual sales.

Social media plays a large role in e-commerce marketing, and is a good proxy for name recognition and brand penetration. We pulled these numbers from our Thinknum Data Trails to give you a sense of where the various players stand:

Jet.com is barely a blip. And while Walmart's dominance in the ground game has given it a huge lead on Facebook likes, Amazon is closing fast, considering the  dollar disparity in their over-all sales numbers.

Here's the same data in chart form, if that makes it easier for you to visualize:

Checkins Facebook likes Were Here count Facebook share count Twitter followers
LinkedIn followers
Walmart 13.5k 34.3m 19.49m - 930k 1m
  - Jet 2.09k 329k - 179k 21.9k 27.9k
  - Sams - 313k 281k - 111k -
Amazon 1.6k 28.74m - 4.98m 2.79m 4.43m
  - Whole Foods 105k 4.3m 1.42m 139k 4.84m 236k

Why do we keep bringing up Whole Foods? Because groceries are the next big battlefield. Amazon purchased the healthy food chain last June and immediately rolled out plans for delivery service, and Walmart - groceries account for 50% of its revenue - suddenly finds itself playing catchup.

Avocado toast?

This week, Walmart announced they were bringing in a new president for Jet.com - Simon Belsham, who has years of experience scaling up grocery deliveries at Tesco, Britain's largest grocery chain. Which, again, is not exactly playing to Jet's strength as a hip brand for urban millennials. 

Which brings us the Walmart's second problem: With its heavy reliance on cost-conscious rural and suburban dwellers, Walmart was very pleased to append Jet.com to its empire. But as so often happens when the Empire moves in, the hip young Lando Calrissians move out. There were culture clashes from the startJet had weekly in-house happy hours at its Hoboken office, while Walmart's hometown of Bentonville, Arkansas was completely dry until 2012.  

Jet got to keep its happy hours (although everyone has to schlep down to the local pub). But bringing in a grocery exec isn't exectly hip, nor is trying to shoehorn groceries in with snappy footware and slim-cut tailored jackets. Amazon owns Zappos, but when it moved into the grocery game it didn't try to get Zappos selling hummus and pita and avocados; it bought Whole Foods.

Jet.com founder Marc Lore is now a honcho in Walmart's digital effort, and you can see his hand in the company's Bonobos purchase, as well as Jet's own curated products, their "Uniquely J" line. But the parent company seems to be backing away from the brand that drove its digital growth spurt, just when it should be upping the stakes.

Walmart CEO Doug McMillon, on an investor call (transcript from Seeking Alpha, via DigitalCommerce360.com), was sending very mixed messages about Walmart's commitment to Jet:

“The Jet brand over-indexed with higher-income, urban, millennial customers when we made the acquisition, and we intend to build on that strength going forward,” McMillon said. “We’ve been investing more in Walmart.com on a national basis and reducing marketing investment in Jet, except in certain urban markets. Due to this change, Jet will not grow as quickly as it did in early days but it will be well positioned where we’ve chosen to focus the brand.”

"Where we've focused the brand" remains unclear.

Jeremy Bloom

When Jeremy Bloom isn't writing about energy, the environment, or the amazing strangeness of modern life, you can find him drinking really good single malt whisky...

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