Wal-Mart in talks to buy online discount retail start-up Jet.com
04 August 2016
Wal-Mart Stores Inc, world's largest retailer, is in talks to buy online discount retail start-up Jet.com, as part of a multi-billion dollar revamp of its e-commerce division, The Wall Street Journal yesterday reported, citing people familiar with the matter.
The paper said that is unceratin how much Wal-Mart would pay for Jet.com, but the unprofitable startup could be valued at up to $3 billion.
A successful deal would be Wal-Mart's biggest acquisition since it acquired a majority stake in South African retailer Massmart Holdings in 2010 for $2.3 billion.
It had originally offered to pay $4.2 billion for Massmart in its entirety, but later scaled it down to $2.3 billion by opting for a smaller 51-per cent stake following opposition from major Massmart shareholders and the South African government. (See: Wal-Mart to scale down takeover offer of South African retailer Massmart)
Jet.com, co founded by entrepreneur Marc Lore, Mike Hanrahan and Nate Faus, is a privately-held e-commerce company based in New Jersey.
It has raised $820 million in four venture rounds from firms including Google Ventures, Goldman Sachs, Bain Capital Ventures, Accel Partners, Alibaba Group, and Fidelity.
In its latest round of funding in May this year, Jet.com was reported to have been valued at $1.3 billion.
It has an innovative pricing system under which it offers large up-front discounts and the lowest prices to encourage users to buy more items at one time and to purchase items that are located in the same distribution centre, making the purchases less expensive for the company to collect and ship.
It initially charged an annual fee of $50 fee, but later changed its strategy and discontinued its subscription model.
Armed with a $9-billion in cash, Wal-Mart has gone on an acquisition spree since the past five years buying 15 startups in order to boost its e-commerce division @WalmartLabs.
Some of these acquisitions include Stylr – a mobile app that allows shoppers to locate clothes in nearby stores, Alchemy – a product research company and a leader in e-commerce technology, Yumprint –a recipe discovery and meal planning service provider, and others.
Wal-Mart's e-commerce business has struggled to keep pace with its larger online rival Amazon. Its online sales were $13.7 billion in 2015, according to research firm Internet Retailer.