In its ongoing bid to join the ranks of the top e-commmerce retailer players, Walmart has made a $3 billion dollar purchase of would-be Amazon killer Jet.com. With Prime members entrenched firmly in Amazon's walled garden, what chance does Walmart have to shift online market share?
Techcrunch was among the news outlets breaking the story, and the article places the purchase as the latest round in an acquisition spree among e-commerce players to shore up their positions: Amazon's spree began several years ago with its purchase of Zappos and niche sites such as Diapers.com. Unilever recently purchased Dollar Shave Club to begin carving out its own niche. Walmart's acquisition is seen largely as a move to bring "superstar" e-commerce player and Jet.com founder Marc Lore to Walmart to enable the retailer to compete head-to-head with Amazon.
Still, Walmart faces an uphill battle considering that most analysts have yet to see Jet make a dent in Amazon's sales. Money quote from Techcrunch reporter Sarah Perez:
"… if Jet's strategy is to lure customers away from Amazon, that, so far, has not happened... they're not yet seeing any cannibalisation of Amazon or eBay sales at this time. In other words, people are buying on Jet, but their purchase rate remains consistent on Amazon and eBay. That could mean that Jet is succeeding instead in gaining customers who would have otherwise bought products via other discount marketplaces, like Costco or Sam's Club, for instance."
Techcrunch also notes that, while Jet.com entered the market touting memberships similar to Prime, the e-tailer eventually ditched the membership play in favor of offering everyday low prices. As the article points out, competing on price alone hasn't helped Walmart's own battle against Amazon, with Walmart's e-commerce sales declining for five consecutive quarters.
The real question for Walmart and new e-commerce head Lore is whether Amazon's reported 54-million member Prime advantage has given the e-tailer an insurmountable lead in online retail. In our view, Walmart's long-term play is to seamlessly integrate its e-commerce and brick-and-mortar operations to differentiate from Amazon on the customer experience. And the retailer will, at some point, come to the inevitable conclusion that it will need to identify, reward, and recognise their most value customers across both online and physical touch points. Absent that effort, it's very likely that Amazon's Prime customers aren't going anywhere.
Read the Techcrunch article here.
-Rick Ferguson
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