Jet.com, which was launched in July, 2015, has been acquired by world’s largest retailer Wal-mart for $3 billion in cash and $300 million in stocks, which would be transferred in a phased manner.
This acquisition has been termed as the biggest deal which $350 billion US ecommerce industry ever witnessed.
Wal-Mart, which is desperately fighting Amazon for online commerce dominance, found Jet.com as the perfect partner for the battle. Compared to Amazon’s over $100 billion+ revenues, Walmart.com managed a paltry $13.6 billion revenue and the gap is widening every single day. (overall, Wal-Mart churned $482 billion revenues)
Here are the America’s largest online retailers based on sales (2015)
As per a press release issued by Wal-Mart, ‘Jet is among the fastest growing and most innovative e-commerce companies in the U.S’, with $1 billion of annual GMV across 12 million SKUs.
As of now, one year old Jet.com is adding around 400,000 new customers every day and are receiving 25,000 orders on a daily basis. Wal-Mart has claimed that Jet has collaborated with 2400 retailers and brand partners for providing best in class services for their customers.
Doug McMillon, president and CEO, Wal-Mart Stores, Inc. said, “We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want.”, adding, “Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”
Jet.com was launched exactly one year ago in the month of July by co-founder and CEO Marc Lore who is best known for founding Diapers.com which was acquired by Amazon for $545 million in 2010. Lore had founded Jet.com to once again compete against Amazon as well as Wal-Mart.
This acquisition is an interesting case study for the ecommerce industry, especially in India where analysts and experts have already predicted market saturation and low demand.
We present three observations for the Indian ecommerce industry:
1) E-Commerce market will evolve into a techno-price war
The stunning rise of Jet.com and its subsequent acquisition by Wal-Mart in a matured ecommerce market like US proves one thing for sure: the warfare and battle strategy has to be evolved and molded, and the catalyst has to be technology and price.
In the case of Jet, they have used a unique ‘real time pricing algorithm’ which reduces the price of the products added in the shopping cart based on several factors. For example, the more products are chosen, the lesser price will become. Besides, in case the customer chooses various products which can be delivered via same distribution center, then the price automatically reduces. If debit card is used, instead of credit card, then the customer gets reduced price.
This unique real time price negotiations based on various factors attracted the customer and forced them to ditch Amazon and chose Jet for time being. In India, this can be an important lesson to learn as ecommerce companies are only relying on discounts to attract the end user.
2) Marketing can ignite emotions if played well
Since the day of their launch, Jet introduced fresh creative energy in the form of unique marketing campaigns and sharp advertisements which gained customers’ attention. They hired R/GA for creating marketing campaigns and roped in media agency Maxus to create unconventional advertisements, including the famous ‘Super Bowl’ ad which surprised and shocked one and all.
In another instance, they picked characters from the customers’ shopping carts, and created viral videos which hit their targeted audience efficiently.
In India, besides full page advertisements and special ‘Sales’, ecommerce portals haven’t actually introduced any mind blowing advertisements or marketing campaigns to attract new users.
3) There is always room for innovation and a disruptor
Recently, CarDekho’s co-founder Amit Jain said that there isn’t any scope for a third player in online auto classifieds niche. This same thinking is slowly seeping into the minds of digital entrepreneurs who wish to foray into ecommerce and retail sector as well.
In India, if someone attempts to challenge Flipkart or say Snapdeal, they wouldn’t be taken seriously as the skeptics assume that the niche is already crowded.
The way Jet.com scared Wal-Mart and Amazon, and scaled to such a level within a year that world’s largest retailer had to acquire it to fight Amazon, then it means that there is always room for disruption and innovation.
There is always a space for the 3rd, and even 4th or 5th player.
Do let us know your views on the acquisition of Jet.com by Wal-Mart, and tell us what it means for the Indian ecommerce sector by commenting right here.