Jet.com: Its Rise, Acquisition, and Shutdown

Do you know that Walmart heavily invested in its e-commerce future in 2016? Jet.com was purchased for $3.3 billion, expecting it to help the company reach affluent and young people living in urban areas. However, at the end of 2020, Walmart finally shut down the jet.com website.

The Jet.com brand was launched as a membership-only retail website. Members were offered large discounts and guaranteed next-day delivery. The initial focus of Jet.com was on airline tickets, but the company gradually branched out to sell food, electronics, and furniture. Later on, Jet, a marketplace allowing companies to sell their products to other companies, was also introduced by the corporation.

Table Of Contents

Overview of Jet.com

The American online retailer, Jet.com was located in Hoboken, New Jersey. Marc Lore, its founder, had been previously selling Diapers to Amazon.com. After coming up with the idea, he teamed up with Mike Hanrahan and Nate Faust to create the company in 2014. The investors were able to acquire $820 million through four funding rounds from investors like Alibaba Group, GV, Bain Capital Ventures, Goldman Sachs, Fidelity, and Accel Partners. After everything was set, the site went live in July 2015.

Jet.com business strategy

Success is all based on strategy. Jet.com implemented a "real-time pricing algorithm" which determined "the genuine marginal cost of sending a product to a client." Here is how it worked:

The cost of goods was calculated according to their warehouse's positions. Users could save money by purchasing many commodities from a particular distribution centre near them rather than multiple warehouses.
The price of a product was reduced if the user agreed to forego their right of return. Jet.com users could earn "JetCash" after purchasing from other merchants who collaborated with the company under a sales program.
The JetCash could be used to make purchases on the Jet.com platform. The retailers and shopping destinations involved in the campaign included Nike, Ann Taylor, Hotels.com, and Bloomingdale's.

The Rise of Jet.com

Do you know that people knew about Jet.com before it was initially launched? To get the word out, Jet.com company developed a program called Jet Insider which marketed the website long before it went live. Some of the special features include:

Members who joined the platform would receive a free six-month trial period and a referral link to share with friends and relatives.
Prizes for referrals included five-year and lifetime memberships and stock options for the top 10 referrers.
Early membership was discontinued in February 2015 after roughly 352,000 customers signed up.

Why Did Walmart Purchase Jet.com?

In 2016, Walmart made the risky move of acquiring Jet.com to better its chances of competing with Amazon. It needed to raise its presence as a key shopping destination for online shopping as well as its existing brick-and-mortar enterprises. To boost its online capability, it opted to hire Marc Lore, an online diaper supplier to Amazon, to oversee operations for Jet.com and Walmart's e-commerce divisions.

This seemed to be a plus to Walmart's business. As Jet.com was a central location for online food shopping, Walmart saw an opportunity to expand its forays into international markets. To compete with Amazon's grocery business, Walmart needed to acquire Jet.com for its online grocery services.

What Did Walmart Acquire After the Acquisition of Jet.com?

After Jet.com, Walmart acquired other digital natives like clothing startup, Bonobos and created new ones like the Mattress Firm. It also launched Express Delivery, a new store-to-door service that delivered products to customers' homes in less than two hours. The company has expanded its curbside pickup and home delivery operations.

However, the money put into expanding e-commerce did have some benefits. Online purchases did increase by 37%. Annually. During the pandemic, they increased by 74% in the first quarter. The pandemic drew in new consumers interested in trying the company's online services daily. However, Amazon remained a formidable competitor, and Walmart's online storefront struggled to be profitable. Selling more than just groceries online proved difficult.

What Caused Walmart to Close Jet.com?

Walmart had trouble turning Jet.com into a profitable business after acquiring it. Thus, chose to shut it down in 2020. Here is the main challenge faced:

High competition Amazon in the grocery market sent Jet.com out of business. No matter how much, Jet.com expanded its customer base, it was no match for Amazon's massive size and devoted following. The decision to shut down Jet.com indicates how challenging it is for a huge retailer like Walmart to compete with Amazon in the e-commerce industry.

Did Walmart Suffer Losses After the Acquisition of Jet.com?

To date, Walmart has not provided separate income and loss figures in online sales. Experts speculated that Walmart's online business would lose roughly $1 billion in the first year. But as per the Wall Street Journal, Walmart probably lost over $2 billion, double the previous estimates.us

What's the Future of Walmart After Shutting Down Jet.com?

Meanwhile, Walmart has been working to develop and grow its strengths, such as a two-hour delivery service. To increase its online sales and decrease losses, Walmart is moving away from an Amazon-like model of fulfillment warehouses but instead relies on its massive shops as both marketing and distribution centers.

What Is the Difference Between Jet.Com and Walmart?

Unlike Jet.com, which operates solely online, Walmart has physical stores where customers can walk in and buy products. The online retailer Jet.com requires users to sign up for a paid membership to access features like member-only sales and expedited shipping, similar to Amazon Prime.

What Happened to the Jet.com Employees after It Was Closed?

The Jet.com Company had about 5,000 employees at the close of business. Walmart relocated the employees to its departments and stores. However, after Walmart's closure of Jet.com, the business opted to end its relations with the company's president, Simon Belsham, and he was permitted to resign.

Conclusion

Walmart's purchase of Jet.com may be considered a mistake, but the company may have had a return on its investment since it was able to hire experts in the field of electronic commerce. Even after letting go of Jet.com, Walmart is committed to expanding its online business.