Revamping Walmart — Will It Work?

Is Walmart going after a new market and rebranding? Walmart’s recent acquisition of Jet, a company with no profits to date, has some scratching their heads. But Jet’s growth, the talent behind that growth and Jet’s customers all could be appealing to a bland and jaded Walmart.

Walmart has been revamping its image for a while now in an effort to “reimagine retail.” The company is modernizing its supercenters, hosting niche food entrepreneurs instead of McDonald’s and Subway, partnering with Uber and Lyft for on-demand car services, updating grocery aisles, adding digital displays and improving its checkout scan-and-go wand. But the company’s recent acquisition of Jet.com could provide even more combustion to Walmart’s competitive trajectory.

Jet.com, which sells household good and groceries, is not yet profitable, but it is showing rapid growth and gaining 350,000 users a month since its launch in 2015. Jet has achieved over $1 billion in sales from more than 4 million shoppers, and Jet’s sales in July grew 168 percent since Aug. 2015, whereas Walmart’s online sales grew by only 30 percent.

Not only that but Jet’s prices are lower than Amazon’s, and the company offers free shipping on all orders over $35. Amazon charges $99 annually for free two-day shipping as part of its Prime membership, and Walmart’s ShippingPass costs $49 a year.

Some think that Walmart sees its acquisition of Jet.com for $3.3 billion as a way to beat out Amazon based on price. But according to CEO Mark Cohen of Sears Canada, it is a “waste of money” and “a terrible mistake.” Cohen’s take is that Amazon’s profitability is not based on its price points but on the company’s seamless methodology and service in delivering consumer goods. Walmart’s online sales were $13.7 billion in fiscal 2015, while Amazon’s sales in 2015 were $107 billion.

Michael Lasser of UBS speculated that Walmart’s purchase of Jet could have been a ploy to bring Marc Lore onboard to run the firm’s eCommerce and that this could herald poaching by Walmart of other top performers from Amazon and eBay. Lore founded Quidsi, a retail technology company and subsidiary of Amazon. New talent from among the best and the brightest would certainly sexy up Walmart, and it is no secret that Jet shoppers tend to be wealthier, younger and more urban.

Doug McMillon, Walmart CEO, said that Jet’s acquisition would help Walmart to compete in the eCommerce space. “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,” he said in a statement. “It’s another jolt of entrepreneurial spirit being injected into Walmart.”