Walmart May Spend 3 Billion to Take On Amazon
Brick and mortar retailer Wal-Mart in talks to buy Amazon challenger Jet.com, according to a new report from the Wall Street Journal. The deal could be valued as much as 3 billion. Launched a year ago, Jet.com has received a huge amount of hype after getting hundreds of millions in funding and a nearly 600 million valuation before selling a single purse, microwave, or bottle of laundry detergent on its e-commerce site. Founded by Diapers.com founder Marc Lore, Jet originally launched its membership-based e-commerce site in July 2015 to take on brick and mortar warehouse clubs like Sam's Club and Costco while also competing against Amazon's bulk products business. For a 50 annual membership, Jet members could buy diapers, cleaning supplies, and sporting goods, promising prices 10 to 15 below elsewhere online. But in October, Jet dropped its 50 membership fee, which at the time was one of its only ways to make a profit. Because of the discounted prices of around 10 on items, Jet doesn't make a profit on its sales. But the company said that customers were still happy with 4 or 5 discounts, allowing the company to make some money from selling items like toilet paper and diapers. Read more Meet Jet,' the Startup Taking On Amazon and Costco, The company has also weathered reports that it was bleeding cash with no clear path to profitability, and scuffled with high profile brands. But a few weeks ago, Lore told Fortune that Jet's sales have tripled in the past six months and the company expects profitability in 2020. In December, it sold 33 million in merchandise compared with 90 million in May. The company is on a 1.1 billion run rate, he added. Lore also said at the time that he is unlikely to raise another round of funding until later this year. In November, the startup raised 618 million in new funding on top of nearly 300 million raised previously. At the time, Jet was valued at 1.35 billion, according to reports. For Wal-Mart, Jet.com would be more arsenal to compete against e-commerce giant Amazon. Wal-Mart's 13 billion e-commerce business is slowing and the company is under pressure from investors to grow. 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 earnings. According to recent data from eMarketer, Wal-Mart is the second largest U.S. online retailer, with 12.5 billion in sales in 2015, a far cry from the 82.8 billion Amazon pulled in. Wal-Mart has been looking to beef up its online marketplace, and said recently it would be adding 1 million items per month to its site. By acquiring Jet.com, Wal-Mart would get more than just an e-commerce site, it would also potentially buy the e-commerce experience of Lore, who sold Diapers.com whose parent company was Quidsi to Amazon in 2010 for 545 million. Lore ended up spending a few years with Amazon before founding Jet.com.