As COVID-19 has created a surge of online shopping, Walmart announced it’s pulling the plug on Jet.com just four years after acquiring the business for $3 billion and a $300 million earn-out over time.
Walmart announced its intention to shutter Jet.com in a two-sentence statement in its Q1 2020 earnings report, which put a positive spin on things: “Due to continued strength of the Walmart.com brand, the company will discontinue Jet.com,” Walmart said. “The acquisition of Jet.com nearly four years ago was critical to accelerating our omni-strategy.”
When Walmart acquired Jet.com, the company was described as one of the fastest-growing e-commerce companies in the US. Initially, the intention was for Walmart and Jet to remain distinct brands, with Walmart.com focusing on delivering the company’s Everyday Low Price strategy, while Jet continued to provide a unique and differentiated customer experience with a curated assortment appealing to urban and millennial consumers. Slowly the operations of the businesses were merged.
Walmart Q1 Numbers:
- Walmart’s e-commerce sales grew by 74% and its same-store sales jumped by 10% in the first quarter.
- The company’s average ticket increased by 16% and transactions dropped by about 6% during the quarter
- The retailer withdrew its financial outlook for the year, saying the coronavirus pandemic has created “unprecedented variability.”
- The company hired 200,000 additional employees to clean stores, stock shelves, and fulfill online orders during the pandemic.
- Walmart reported net income rose to $3.99 billion, or $1.40 per share, from $3.84 billion, or $1.33 cents a share, a year earlier. Excluding items, Walmart earned $1.18 per share.
- Analysts were expecting Walmart would earn $1.12 per share, according to Refinitiv.
The History of Jet.com:
- Jet.com was founded in 2014 and launched in 2015 by co-founders Marc Lore, Mike Hanrahan, and Nate Faust. Lore previously co-founded and led Quidsi, the parent company of e-commerce sites Diapers.com, Soap.com, and Wag.com. With the help of Faust and Hanrahan, Lore grew Quidsi into a prominent and successful business that was ultimately sold to Amazon for $540 million in 2010.
- Jet.com raised $820 million over four venture rounds from GV, Goldman Sachs, Bain Capital Ventures, Accel Partners, Alibaba Group, and Fidelity.
- Walmart acquired Jet.com in 2016 for $3 billion.
- According to Kantar, estimates cited by Reuters say that Jet’s sales shrunk to $689 million in 2019, down from the $1 billion it forecasted in 2016.
- In 2019 Walmart continued the integration of the companies, eliminating the Jet president role.
- Jet.com’s fate was disclosed as part of a Walmart’s Q1 earnings report, in which the company said it saw growth of less than 10% in its core US market, and said that it would be withdrawing guidance for fiscal 2021.
- Walmart CEO Doug McMillon hasn’t ruled out using the brand name in the future, but said he’s seen the Walmart name “resonate regardless of income, geography or age.”
- All the Jet co-founders remain at Walmart in prominent positions; Marc Lore formerly Jets CEO is President and CEO, Walmart e-commerce US, Nathan Faust, formerly Jet’s COO, heads up the supply chain for Walmart US e-commerce, and Mike Hanrahan, who was Jet’s CTO, is now the head of Walmart’s Intelligent Retail Lab.
Photo: via Jet.com