Walmart will purchase Jet.com, sealing the deal on the biggest e-commerce buyout in history and making rivals such as Amazon shaky on their feet.
The total cost of the transaction will be $3 billion in cash and an additional $300 million of Walmart shares.
Walmart CEO Doug McMillon stated that his company acknowledges customers' preference for low prices, large product assortment and the simplest, easiest shopping experience, and it is going to deliver exactly that.
Marc Lore, Jet.com's co-founder, will remain on board the company after the transaction is completed. As owner of 25 percent of Jet.com, the deal could secure his as much as $750 million from the deal.
In a statement, Lore explained the strong points of the two organizations. Walmart's pluses come from a mélange of retail expertise, distribution footprint, purchasing scale, digital assets and sourcing capabilities. According to Lore, Jet's advantages rely on "the team, technology and business it has built."
Lore is also the co-founder of Quidsi, which counts e-commerce sites such as Soap.com, Wag.com and Diapers.com.
Purchasing Jet.com should help Walmart beef its online presence and get closer to its main rival, Amazon. Reports indicate that Walmart counts about $14 billion in e-commerce sales per year, while Amazon rocks a solid $99 billion in annual revenue. The two companies are mirroring one another — Amazon is dominating the e-commerce world in the same way Walmart rules retail with its brick-and-mortar stores.
Before the deal, Jet ambitioned to take on Amazon by itself. Although it was evaluated at about $1 billion, Jet said that it aims to become a $40 billion company in no less than five years.
Those unfamiliar with the details should know that items from Jet.com are usually sitting 10 to 15 percent lower than those of its competitors. However, this comes with a string attached in the form of marketing monthly bill ranking tens of millions of dollars. What is more, Jet recently renounced its $50-a-year subscription plan to attract more customers, which will also impact the revenue stream.
Details of the deal show that Jet and Walmart will be led by different boards. Walmart is purportedly going to keep investing in its Everyday Low Price strategy, while Jet will offer a "unique and differentiated customer experience with curated assortment."
Walmart benefited from the know-how of Allen & Co. and JPMorgan for the purchase, which should be completed this year, after regulatory approval.
As a reminder, Aug. 18 is the day when Walmart will unveil its Q2 earnings. Stay tuned to get our upcoming coverage Walmart's earnings call.
