Wal-Mart Tries to Compete with Amazon

Wal-Mart has struggled to compete online to keep pace with ecommerce trends, with online sales of only 7% and online sales of $14 billion. Compare this with Amazon's $99 billion retail business, and Wal-Mart was under pressure to do something big. 

Just as Wal-Mart rolled out new staffing software, and after days of speculation, they made the expected announcement. Wal-Mart acquires the 2 year old eCommerce startup Jet: 

The deal values Jet at $3 billion, and CEO Marc Lore will remain at his post and will helm Walmart’s U.S. ecommerce operations.

Image Credit: Jet.com/Facebook

Jet is a well-funded startup whose mission statement was to be a competitor with Amazon one day, and it seems they got their wish. 

It pans out as the biggest deal in U.S. ecommerce startup history. 

Jet was on pace to dip into Amazon's disruptive model, by offering lower prices and optimizing convenience in the modern formula. Experts in the field believe Jet found a way to out-do Amazon at their own game, in terms of price efficiency and shipping intelligence. 

Can Jet be Wal-Mart's innovation engine to help them compete with Amazon?

However from a consumer perspective Amazon's brand is now in a unique position that is synonymous with convenience, it's hard to imagine Wal-Mart being able to keep up, but this represents maybe the smartest move they could have done given the available options. 

The CEO of Jet, may end up running both Jet and Walmart.com and is thought to be a key component of the deal. With Wal-Mart's rather large merchandise assortment and Jet's disruptive efficiency (think shipping proximity), many believe it could be a potent combination. 

Though Amazon's momentum is unparalleled in the history of American retail. 

While Wal-Mart is spending billions to keep up, there's no doubt who the leader of the field is. 

While Jet has swiftly reached a billion-dollar valuation, it's spent millions to acquire customers and hasn't turned a profit

Why it's Significant 

The reason this is important for Retail at large is it represents the battle between Ecommerce and brick-and-mortar big-chain retailers. When paradigms collide, the innovation that results is good for all of us. 

Wal-Mart has after all, 11,527 stores under 63 banners in 28 countries with a 2016 revenue of $482 billion, employing over 2.3 million associates worldwide. Wal-Mart simply had to do something to cut into Amazon's disruptive growth, though is it too little too late?

Jet's formula is not to be questioned, but can they or Wal-Mart compete with the key point of Amazon's convenience, it's customer retention rate? If Jet's repeat purchase ability were higher, perhaps the acquisition would be a more serious threat to Amazon. 

Wal-Mart vs. Amazon is one of the more interesting topics in the future of big-box retail. You can read more of my retail insights here. Amazon's cash flow from operations paints an interesting picture: 

In 10 years time, who do you think will be a more dominant figure in retail globally, Amazon or Wal-Mart?