American retail giant Walmart has entered into a deal to acquire online retailer Jet.com for $3.3bn – despite the startup only launching in July last year.
Walmart is paying approximately $3 billion in cash for Jet, in addition to $300m in stock.
Jet, which currently only serves the US market, is attempting to rival Amazon with a unique ‘prices drop as you shop’ model.
Buying certain items from the site – which sells a wide range of CD and vinyl – brings down the cost of other goods in a user’s basket, encouraging them to purchase more than one product.
According to Nielsen, ‘mass merchant’ US retail sales of physical albums in the first half 2016 were down 23% year-on-year to 17.6m units.
They were overtaken by sales at ‘non-traditional’ retailers – including online stores – which were up 8.2% to 18.8m units.
Jet.com has previously taken on investment from the likes of Google Ventures, Goldman Sachs, Bain Capital Ventures, Accel Partners and Alibaba Group.
Walmart’s acquisition, which is subject to regulatory approval, has been approved by the Boards of Directors for both companies and is expected to close this calendar year.
“We’re looking for ways to lower prices, broaden our assortment and offer the simplest, easiest shopping experience because that’s what our customers want,” said Doug McMillon, president and CEO, Wal-Mart Stores, Inc.
“Walmart.com will grow faster… and we’ll enable the jet brand to be even more successful in a shorter period of time.”
Doug McMillon, WalMart
“We believe the acquisition of Jet accelerates our progress across these priorities.
“Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time.
“Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart.”
Jet is led by co-founder and CEO Marc Lore, together with fellow co-founders Mike Hanrahan and Nate Faust.
Among other things, Lore previously co-founded and led Quidsi, the parent company of e-commerce sites Diapers.com, Soap.com and Wag.com.
Inclusive of transactions taking place on its third-party marketplace, Jet generated $1bn in run-rate Gross Merchandise Value (GMV) in its first year, offering 12 million items.
The online store boasts more than 400,000 new shoppers each month, with an average of 25,000 daily processed orders.
“We started Jet with the vision of creating a new shopping experience,” Lore said. “Today, I couldn’t be more excited that we will be joining with Walmart to help fuel the realization of that vision.
“The combination of Walmart’s retail expertise, purchasing scale, sourcing capabilities, distribution footprint, and digital assets – together with the team, technology and business we have built here at Jet – will allow us to deliver more value to customers.”
Walmart and Jet say they will maintain distinct brands, while borrowing “innovative technology solutions from both companies to develop new offerings to help customers save time and money”.
Each week, nearly 260 million customers and members visit Walmart’s 11,527 stores under 63 banners in 28 countries and e-commerce websites in 11 countries.
With fiscal year 2016 revenue of $482 billion, Walmart employs more than 2.3 million associates worldwide.Music Business Worldwide
