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Walmart has been making a series of moves to boost online sales and better take on Amazon. Today the company is making another big bet towards that path by confirming it will be buying Jet.com, online-only shopping site that has been live for a little over a year, for $3 billion in cash plus up to $300 million in shares for Jet founders.
The deal is expected to close towards the end of the year, subject to regulatory approval, making this one of the largest-ever acquisitions of an e-commerce company.
Jet’s founder Marc Lore will reportedly lead Walmart’s e-commerce operations after the deal closes, replacing Neil Ashe after a transitional period. Lore previously co-founded Diapers.com’s parent company and sold it to Amazon for $550 million in 2011.
Walmart currently has 11,527 stores in 28 countries with a total annual revenue of $482 billion and $15 billion in profits last year. E-commerce represents just a drop in the bucket with $14 billion in annual e-commerce sales, a far cry from Amazon’s roughly $100 billion, and its growth rate has reportedly decelerated for five consecutive quarters.
With the acquisition of Jet.com the retail giant hopes to reinvigorate online sales. Wal-Mart and Jet plan to maintain distinct brands, with Wal-Mart's website continuing to focus on emphasizing the company's "everyday low price" strategy.
While still not profitable and burning through advertising money at a rate of $20 million to $25 million per month to fund its growth, Jet has been adding more than 400,000 new shoppers each month and processes an average of 25,000 orders daily. The site sells more than 12 million products through its own warehouses and a network of third-party sellers.
Aside from acquiring a growing e-commerce operation, Walmart is also interested in Jet’s back end technology, which can identify in real time which orders should be routed to which vendors to get the lowest fulfillment and shipping costs and pass some of that savings to customers.