BUSINESS - Why Would Walmart buy Jet.com?

For the past 48 hours the internet buzz suggests Walmart is attempting to buy startup Jet.com for US$3 billion dollars.

Since September of 2012, PetLynx management has been watching and documenting a growing trend for large brands to acquire subscriber/member based organizations.

Two questions beg an answer in all of this: Why would Walmart acquire a startup that is only a year old, has spent most of the US$800,000 capital it raised, has no plans to turn a profit and has had to eliminate membership fees to sustain member growth; and, Why would it make sense to pay US$3 billion dollars for a company that had sales of US$33 million in December of 2015.

The answer to these questions must consider two important paradigm shifts:

• Consumers have moved to mobile devices en mass for shopping convenience and price discovery.
• Brands do not have the two resources it takes (time and dollars) to grow a mobile application, especially if one already exists.

As Leena Rao writes in the Fortune article, Walmart has come under fire for not growing its e-commerce strategy quickly enough to maintain its position in the retail environment:

Wal-Mart’s $13 billion e-commerce business is slowing. In the first quarter of this year e-commerce sales rose only 7% in the quarter.  “Growth here is too slow,” Wal-Mart CEO Doug McMillon said on a pre-recorded call following the earnings report.

For Marc Lore and his colleagues at Jet.com, this transaction may produce an outstanding pay-out. 

For other subscriber/member based plays with an existing and trusted ecosystem, this transaction should increase demand and help in the quest for development capital.

About Executive Producer, Larry R. Evans:

Larry Evans is a futurist, brand analyst and collaboration advocate. He is Principal of The Paradigm Corporation, which is headquartered at Thunder Ridge just outside Crossfield, Alberta, Canada. He is known for bringing a unique and predictive lens to bear on paradigm shifts during a career that spans 45 years. Now from his wheelchair, he brings a grounded, tenacious view of brand, client entitlement and trusted relationships for the digital age. His perspective and values influence his life, business and ministry.