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Walmart Pulls Plug on Online Marketplace Jet.com

Online marketplace Jet.com was acquired by Walmart back in 2016, as it sought to focus considerable resources on building an e-commerce presence.
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Retail giant Walmart is making some significant changes to its service, as the firm adapts to the new market landscape. The firm has announced its intention to shut down Jet.com, one of its online subsidiaries.

Jet Didn’t Meet Walmart’s Expectations.

Online marketplace Jet.com was acquired by Walmart back in 2016, as it sought to focus considerable resources on building an e-commerce presence. The firm had seen the success of companies like Amazon and Alibaba at the time. Looking to seize the opportunity – and a considerable amount of market share – for itself, the firm splurged $3 billion for Jet. The deal also included $300 million in earn-outs over time.

The retail giant said its decision to shut down Jet.com was due to the increasing brand recognition of the Walmart brand but this decision looked inevitable. Last year, Walmart’s U.S e-commerce business lost $2 billion. Besides Jet.com, Walmart’s expansion into e-commerce includes some notable flops such as menswear maker Bonobos, membership-based service Jetblack, ModCloth and plus-size women’s wear Eloquii.

Sadly, Jet.com never materialized into the e-commerce behemoth that Walmart hoped it would. As Walmart explained in the Q1 report, the company saw less than 10 percent growth in its core U.S. market. Instead of pushing its luck any further, the company has decided to cut its losses – quite literally.

The news is coming as a bit of a shock, especially as American e-commerce is taking off. Walmart itself noted that it saw a staggering 74 percent growth in its e-commerce market in Q1 2020, as the coronavirus pandemic has forced a surge in online shopping across the country.

Figures like these point to Walmart gaining significant ground in its mission to become Amazon’s strongest competitor. Amazon has guzzled up the lion’s share of the e-commerce space for years now, and it posted impressive numbers in Q1 2020 too. However, while Walmart is the world’s biggest retailer, it lags behind Amazon in the online retail space.

A Solid Quarter from Walmart Nonetheless

Estimates from eMarketer show that Amazon had up to 39 percent of online sales in the U.S. as of March. Walmart, on the other hand, owned just 5 percent. Despite the low numbers, a quarter like this most likely means that Walmart will comfortably take that #2 spot from the ever-declining eBay.

On the whole, however, Walmart had a quarter to be proud of. As its earnings report showed, the firm recorded revenues of $134.6 billion in Q1 2020, an increase of $10.7 billion – 8.6 percent. Adjusted earnings per share also stood at $1.18.

“Unprecedented demand for products across multiple categories led to strong top-line results. Certain incremental costs negatively affected operating income, including costs associated with enhanced wages and benefits as well as safety and sanitation,” Walmart said.

The company also explained that its products had been selling out much faster than anticipated. To deal with this surge, the firm hired 235,000 workers across the country in the last quarter.

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Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works. jimmy@moneycheck.com


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