Wal-Mart stores Inc. agreed to buy
e-commerce startup Jet.com Inc. for about $3 Billion in cash, giving the world’s
largest retailer the resources for a stronger shopping website to compete with
Amazon.com Inc. the online market leader.
The deal also includes $300 Million
in Wal-Mart shares that will be paid over time. Acquiring Jet.com, which achieved
a $1 Billion gross merchandise run rate in a little more than a year, gives
Wal-Mart a website that processes an average of 25,000 orders a day and is
adding 400,000 shoppers monthly.
Wal-Mart has spent billions expanding
its online operation, including hiring thousands of workers, opening two
offices in Silicon Valley and building large e-commerce distribution centers. It
also started an annual subscription service similar to half the price to Amazon
Prime. Amazon’s $99 a year service provides free two day shipping on millions
of items, encouraging shoppers to stay on the website, as well as the company’s
video entertainment offerings.
Hoboken, New Jersey based Jet.com
has distinguished itself in e-commerce through “gain sharing” luring buyers to
add items to their orders to reduce shipping costs, and to pay with debit instead
of credit cards to reduce transaction fees. Traditional store based mass
retailers such as Wal-Mart, Target Corp. and Costco Wholesale Corp. have been
struggling to lend off Amazon’s momentum in online shopping.
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