The cat’s out of the bag and last week’s rumor was confirmed Monday: Walmart has agreed to acquire Jet.com in a $3.3 billion cash and stock deal in what represents Walmart’s most aggressive move to date to counter Amazon’s dominance. We always look at developments in the e-commerce market from a seller’s perspective, so here’s our take.
The combination represents a big jolt to two of the fastest-growing marketplace partners we work with at ChannelAdvisor. As we reported last year, Jet popped out of the gate and quickly became our fourth-largest marketplace just a couple months after launching due to aggressive promotion. And as we shared at our Catalyst show in April, Walmart’s newly relaunched marketplace drove huge growth for our customers in Q4 2015. So both Walmart and Jet have been great for our sellers, opening up new avenues to reach consumers and drive sales.
However, despite the respective growth and scale of Walmart and Jet, Amazon has continued to take market share at an accelerating rate and at an already-massive scale. This consolidation marks a major escalation in the battle of marketplaces and brings together Jet, a scrappy, fast-moving upstart with tech chops and an innovative pricing model, with Walmart, a retailing behemoth with massive consumer reach globally.
It’s a bet that probably had to happen: thanks to the widespread adoption of Amazon Prime, dominance on mobile devices, massive product selection and a speedy and fast-growing fulfillment network, Amazon actually increased its share of US online retail sales from 25% to 2012 to 33% in 2015. Incremental moves by Walmart weren’t going to be enough. This acquisition is expected to solidify Walmart’s position as Amazon’s largest direct competitor while differentiating it from other brick-and-mortar competitors.
One of the biggest assets in this acquisition is the deep e-commerce experience that Jet.com brings to Walmart. Jet.com CEO Mark Lore is a well-known visionary in the tech world and brings extensive e-commerce know-how to the table, having previously founded Quidsi (Diapers.com) which he subsequently sold to Amazon for $545 million.
I’ve gotten to know Marc through our strategic partnership with Jet and can honestly say he’s one of the most driven and focused entrepreneurs I’ve ever met. He’s a formidable competitor and a great win for Walmart to lead the team… he won’t be afraid to crack some eggs. Marc launched Jet.com in 2015 to much fanfare — highlighted by an innovative pricing model meant to help retailers and brands compete with Amazon on price. It’ll be interesting to see how this marriage of fresh technology and innovative pricing and logistics from Jet and sheer volume and global reach from Walmart play out.
How Will Amazon React?
Loyal readers and customers already know that Amazon doesn’t tend to react directly to competitive moves: they focus relentlessly on the customer, specifically on the three tenets of selection, price and convenience. Thus, we don’t expect an overt reaction from Amazon; rather, we expect Amazon to continue investing in fulfillment centers and building out logistics capacity to keep getting more and more packages to consumers as fast as possible.
Beyond the immediate players, we don’t expect this to have much of an immediate impact on eBay, although it could be incrementally more challenging for smaller third-party marketplaces to stand out — especially as this well-capitalized combination is expected to sharpen its focus and continue to invest.
E-commerce is one of those markets where the big tend to get bigger.
The Bottom Line for Online Sellers
While everyone will have to see exactly how this marketplace battle shakes out in the months and years ahead, right now we think this is a positive development for online sellers as it marries two competitors with complementary capabilities who will undoubtedly seek to work even more closely with as many sellers as possible to ensure the best possible selection and pricing. If you’re not selling on Jet or Walmart or both, we strongly recommend you do.
We expect both sites and brands to continue for the near future and actually think it makes sense to operate them as separate front ends as they appeal to different demographics and some brands may be more comfortable with one site over the other, while we expect a lot more crossover of sellers and consumer traffic on the back-end to benefit both sites. And, as always, we strongly recommend to sellers that they integrate to many sources of consumer demand to ensure diversified sources of revenue.
Blog post by David Spitz, CEO at ChannelAdvisor