Walmart is discontinuing Jet.com, the e-commerce startup it acquired for $3.3 billion in 2016.
The Bentonville retailer announced the move in its 2020 first-quarter earnings report. According to the report, Walmart is discontinuing Jet.com due to the “continued strength of the Walmart.com brand,” but it credited Jet with helping to accelerate its e-commerce strategy.
Marc Lore, who serves as the CEO of Walmart’s e-commerce division, co-founded Jet.com in 2014. The Hoboken, New Jersey-based company was acquired by Walmart in August 2016
Acquiring Jet.com was intended to set the foundation for Walmart’s online growth and establish it as a major e-commerce player. At the time of its acquisition, Jet.com was not profitable, although the company had reported that it would be profitable by 2020, according to TechCrunch.
“We’re thrilled to welcome the Jet.com team to the Walmart family and excited to expand the ways we serve our current customers and reach new customers online,” Walmart CEO Doug McMillon said in a September 2016 statement. “Jet brings a unique approach and technology that puts customers in control of their experience, helping them find additional ways to save.”
At the time, Walmart was still the second-largest e-commerce retailer with $13.6 billion in annual revenue, according to a 2016 CNBC report.
While Walmart’s online presence has steadily increased, the company’s e-commerce division has yet to turn a profit and is still contending with Amazon.com in the online retail space. Walmart reported a 74 percent increase in its online sales for the first quarter, citing increased grocery pick up and use of delivery services. By comparison, Walmart’s U.S. sales only increased by 10 percent.
Walmart reported that its e-commerce sales increased by 37 percent last year. However, a Wall Street Journal report estimated that Walmart had lost roughly $2 billion on e-commerce during the 2019 fiscal year.
As of May 20, the Jet.com website is still up and running. As reported by CNBC, McMillon said in an analyst call that Walmart may use the Jet.com name in the future but that it the Walmart brand “has so much traction.”
Despite the shutdown, many pundits view Jet.com as a success story for Walmart. According to Axios, the Jet.com purchase “arguably the retail industry’s most successful acquisition ever of a tech company.” The site attributes this mainly to the hiring of Lore, who took over the e-commerce division, leading to increases in sales.
Jeremy Bowman, writing for The Motley Fool, also claims the acquisition as a success and the shutdown as working in Walmart’s favor. Bowman also credits Lore with Walmart’s increased success in the e-commerce space. “Letting go of Jet.com should help the company further stem those losses — the start-up was never profitable, and investing in it no longer makes sense,” he said.