Walmart’s Jet Acquisition Will Spur on Amazon’s Fulfillment Plans
If you can't beat them, buy them. It's a concept familiar to many in the tech sector and it seems to be catching on in retail, if Walmart's $3.3 billion Jet acquisition is anything to go by.
For anyone unfamiliar with Jet.com, it's the online retail platform founded by Marc Lore, who previously sold diapers.com to none other than Amazon. Launched to the public little more than a year ago, Jet quickly racked up a reputation for deep discounts and rewards for consumers who bought in bulk. By leveraging extensive VC funding and the e-commerce expertise of its founder, the site was able to accelerate to a valuation of more than $1 billion in twelve months.
Okay, that's a little harsh. Walmart is the fourth largest online retailer and the most notable challenger to Amazon's online crown. Nonetheless, for a brand that dominates America's physical retail landscape, lagging so far behind digital competitors is simply unacceptable.
With that in mind, what Walmart needs more than anything else at this juncture is a clear e-commerce strategy crafted by someone with a proven track record in online sales.
Marc Lore ticks both of these boxes and many more.
As industry analysts have been quick to point out, this acquisition is as much about bringing Lore on board as it is integrating the abilities of Jet.com into Walmart's expansive operation. While the official explanation praises outgoing CEO of global e-commerce Neil Ashe for his role in bringing Walmart this far and seeks to frame the acquisition as the next phase of the company's e-commerce growth, this glosses over the reality of the situation.
With e-commerce sales set to surge past the $500 billion mark before the decade is out, according to Forrester Research, the big box retailer simply couldn't afford to fall any further behind its online competitors. It clearly believes that a fundamental rethink of its online retail proposition is in order and that Lore is the perfect choice to lead the charge.
Amazon Eyes the Sky
For its part, Amazon is not resting on the laurels of its online dominance. The company recognizes the challenges ahead, especially as consumers drive demand and existing delivery capacity is constrained by infrastructure limitations.
As we projected at the end of last year, Amazon is taking significant steps to remedy this situation.
A crucial part of the strategy is to control more of its order fulfillment solutions. It's for that reason that we have already seen the company register to engage in ocean freight, partner with airlines to fly Amazon-branded planes, and even get serious about the drone delivery program that most observers assumed was a gimmick.
As well as the need to prepare for the literal and figurative bumps in the road that lie ahead for the fulfillment sector, Amazon's strategy is rooted in its obsession to get goods to customers even quicker. Prime subscriptions are already rooted in the expectation of delivery within two days. The company also offers widespread availability of same-day delivery and Prime Now, which gets packages to their destination in under two hours in select cities.
Rapid delivery is clearly one of the next major competitive advantages in our sector, and Amazon intends to arrive first.
With their respective moves, both Amazon and Walmart are gearing up for the next phase of the e-commerce expansion. The Jet acquisition sees Walmart playing catch up but there is plenty of runway remaining. Online sales growth shows no sign of slowing down and millennials are coming of age, making them the dominant buyers and the driving force behind modern consumer trends.
The next few years pose unique challenges to each company if they are to make the most of this growth.
One has to consolidate its position as market leader and stay ahead of the inevitable fulfillment challenges, while the other must quickly integrate its newly-purchased expertise and find an edge in a highly competitive field.
It seems clear which position is preferable but in a sector this dynamic the old adage about assumptions applies more than ever!