Transcription
Walmart on Monday announced it would buy online shopping site jet.com for about $3 billion. The deal appears to be the largest ever acquisition of an e-commerce company, and it comes as Walmart tries to close a big gap between itself and Amazon in online shopping.
Revenue. So joining us to talk about this deal is Mark Spoonauer, editor-in-chief of Tom's Guide and Laptopmag.com.
Mark, great to speak with you today.
Hey, you too. Jet.com, only 2 years old, it was last valued at $1.6 billion. What put this on Walmart's radar, and why for so much money?
Yeah, a lot of people are saying that Walmart paid too much, but there is a huge gap that they have to close between themselves and Amazon. You know, last year I think they had 14 billion in online sales versus more than 90 billion for Amazon. So certainly this is not alone going to close that gap, but they get a very unique talent in terms of Mark, who is their CEO. Uh, they also get a very unique business model and just the way that they're delivering products to customers that allows them to save money the more that they add to their cart.
Yeah, it's uh, some folks have actually speculated in many ways this is a $3 billion aqua hire, um, and I also think it's really interesting because when you think about transportation costs, I would imagine that Jet getting absorbed into Walmart is going to bring some of those transportation costs down to deliver all those goods to people.
What's different about its business model compared to, say, Amazon's?
Yeah, so the way that it works is that less than a third of the orders that come from jet.com actually come from its own warehouses. They have more than 2,000 partners out there, and the way it works is that depending on where your orders are being routed from, that will actually determine in real time how much you're paying and also in a way how much Walmart will wind up paying to ship those products to you. So it could save you money as well as them in terms of the shipping costs.
And Amazon pulls in about $99 billion in annual e-commerce sales—huge number. Compared that to Walmart's $14 billion. How can jet.com help close this gap? It seems like a really big gap.
Yeah, well, what I like about Jet is that uh, is the type of people that they're bringing in. They have a lot of millennials and urbanites, which is an area where Walmart is weak, and they're also pretty nimble in terms of experimenting with new ideas. For example, you'll save more if you use a debit card or if you refuse the right to return certain purchases, which might work for, you know, durable goods and things like that. So in a way, they could actually be a step ahead of Amazon in terms of implementing new ideas, and I like the fact that they're keeping jet.com a separate brand. So in a way, they could be like their in-engine while Walmart learns from what they're doing, and it can have a trickle-down effect for the brand.
Mark Spoonauer, thanks for joining us and thanks for breaking this deal down.
Thank you for watching. I'm Morgan Brennan. Have a great day.
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