Wal-Mart Takes on Amazon

All it took was a $3.3 Billion deal for Wal-Mart to enter into a head on match with Amazon to see who can win the online shopping Giant of the Year award.  Wal-Mart signed the deal last week to purchase Jet.com to help kick start their e-commerce business operations.  The deal is the largest ever purchase of a US e-Commerce start up according to the Wall Street Journal.

The deal is a clear sign that Wal-Mart sees the growth of on-line sales as a way to boost Wal-Mart’s business now and well into the future.  The new Wal-Mart e-Commerce business unit will be led by Marc Lore, Jet.com’s 46 year old founder.  He will be responsible for both the Wal-Mart and Jet.com business units.  Wal-Mart’s former top on-line executive, Neil Ashe will be leaving the company.

So what does this big investment do for Wal-Mart, glad you asked:

1. The acquisition marks a significant shift in how Wal-Mart approaches e-commerce which they launched 15 years ago
2. Wal-Mart has spent billions to build up its on-line distribution network, opening 7 large scale distribution centers in the US
3. Wal-Mart has always looked at e-Commerce as a secondary business to their big store retail operations, obviously that thinking is changing quickly
4. Wal-Mart has a long way to ARRIVE AT Amazon’s sales numbers.  Last year Wal-Mart had $14 Billion in e-Commerce sales or 3% of their total annual revenue
5. Amazon on the other hand had sales last year of $107 Billion including its Web Service Business
6. Jet has been claiming that it would offer shoppers lower prices than Amazon, a fact that remains to be seen
7. This acquisition for Wal-Mart will add some 400,000 shoppers monthly and is expected to generate over $1 Billion in sales annually
8. Wal-Mart will gain access to a larger group of young, wealthy, urban shoppers, a group that up until now has not been on Wal-Mart’s radar screen
9. In recent months Wal-Mart has added a number of products it sells on line, but continues to lag behind e-Commerce sales growth
10. Wal-Mart.com now has in excess of 11 million products and is growing rapidly by giving third-party sellers access to their site and encouraging their vendors to up-load product information about their products on Wal-Mart.com

This is truly a “Big Deal” for Wal-Mart and for e-Commerce sales.  While there is a lot of integration that will need to be handled quickly and precisely, we are sure that this new Wal-Mart acquisition will be a boon for business and for the on-line shopping community.