Last week, there were whispers that Walmart was in talks to buy e-commerce retailer Jet.com. On Monday, Walmart announced that the acquisition would be moving forward, at a cost of $3 billion in cash and $300 million worth of Walmart shares. The two brands will not be combined, but both companies are looking to take advantage of each other’s strengths to offer low prices online.
The deal is a way for both companies to challenge their primary competitor, Amazon. For Walmart, Amazon has become an existential threat as more Americans have been buying household items online: Amazon’s 2015 sales revenue included nearly $80 billion in product sales, and the company accounted for 60 percent of the year’s growth in U.S. online sales growth. Walmart’s sales, overall, still far outstrip Amazon’s at $482 billion, but its e-commerce sales, at $12.5 billion— just 2.5 percent of its total sales—have been slowing in the past two years. In a call with investors regarding Walmart’s second-quarter earnings in May, CEO Doug McMillon said that growth in its e-commerce sector wasn’t fast enough.
In the past decade, Walmart has largely focused on its sales in its physical locations. But earlier this year, the company announced the closure of over 150 U.S. stores, and while it still has about 4,600 of them, it is looking for growth that pairs its massive brick-and-mortar scale with robust online retail.
