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When Jet launched a year ago, part of the hype surrounding the new online shopping service was that it would be less expensive than Amazon and it would challenge Amazon in sales.
A year later, it’s not clear that either has happened. But Jet was able to attract millennials to its customer base in significant numbers, which is something.
Walmart, on the other hand, has been trying to challenge Amazon by offering products online that could be delivered to buyers either directly or through product pickup at one of its brick-and-mortar stores. Considering how ubiquitous Walmart outlets are, in-store pickup is a viable alternative and it has some advantages.
But Walmart was never able to really break in to online sales in a way that would challenge Amazon. For one thing, products on the Walmart website rarely were cheaper than what was on Amazon and fast delivery was only an option if the desired product was already in a store near you. While Walmart’s online offerings were broader than what you’d likely find in one of its brick-and-mortar stores, its selection didn’t challenge Amazon.
Still, there’s more to e-commerce success than selection. To be useful to consumers, an e-commerce site also has to be able to offer the products at the price consumers want to pay, and they need to be delivered where, when and how the consumer wishes.
These are the reasons why Amazon, especially its Amazon Prime service, has been so successful. Neither Walmart nor Jet have been able to emulate Amazon Prime, although Walmart does offer its ShippingPass, which provides free two-day shipping for half the cost of Prime, but without the extra features such as music and videos and without the one-day—or in some areas—same-day delivery.
But Walmart’s online store never really caught on. The reasons for this are many, but they’re likely rooted in Walmart’s history as a brick-and-mortar retail chain. The answer, of course, is to find new roots—in this case, the new and trendy Jet. The question then becomes, Can stodgy old Walmart make the switch? This is why Walmart apparently insisted that Jet CEO Marc Lore come to Walmart along with the Jet.com organization.
“Mark Lore is an e-commerce legend and there are few people who, if tasked with doubling or tripling walmart.com, would be up to the challenge. His team is,” said Forrester retail analyst Sucharita Mulpuru. Lore has a long history of successful innovation in e-commerce, which explains why Walmart picked him and why the retail giant was willing to pay $3.3 billion for Jet.com.
The next question is whether it will work. “Whether they will be able to do it remains to be seen, but I am confident we will see creative innovation coming out of Walmart at a fast pace now,” Mulpuru said in an email.
Walmart Needs $3.3 Billion Jet.com Buy to Jump-Start Web Sales
“Hopefully a few of those ideas will resonate with shoppers too,” she said.
Mulpuru said that when she’s shopped at both Jet and Amazon, frequently she’s found what she’s looking for less at Jet. This parallels my own experience with both companies. It also provides a strong rationale for the merging of Jet and Walmart’s online stores, if only because it gives Jet the range of products it needs and Walmart the web retailing expertise it needs. But will it work?
“This is a bet,” Mulpuru said. “It could turn out like the early days of eBay and PayPal, or it could turn out like eBay and Skype. Time will tell.”
The biggest issue is likely to be whether Walmart gives Lore the freedom he needs to transform Walmart.com into the kind of e-commerce presence it needs to be. That would mean allowing some departures from Walmart’s way of doing things that are strongly centered around its retail stores, even to the point of demanding that shoppers select their favorite store location before shopping online.
But one hopes that Lore will realize that Walmart brings a powerful capability that Amazon can’t match: those same retail stores, which provide more than just a way for consumers to see and feel a product before they buy it. They also provide a secure delivery location and a way to return things that didn’t meet expectations quickly and easily.
The Walmart-Jet acquisition also brings one more thing to consumers that they haven’t really had in the past, which is a choice. While there are plenty of online retailers, for many Amazon was the only place that sells nearly everything someone wants to buy, and while the prices weren’t always the lowest, they were close. But with the Walmart-Jet acquisition, there’s competition.
Real competition between capable and credible online retailers would mean that consumers would see even better prices, better service or both. Walmart will have to start finding ways for one-day delivery—and not just store pickup. Amazon would have to find a way to offset the convenience of a physical store where consumers can see and touch products before they buy and where products can be returned.
Does this mean that Amazon will have to open more brick-and-mortar stores than just the one in Seattle? Perhaps, but it’s unlikely it could reach the penetration of Walmart. The ultimate answer likely will mean more innovation from both companies—and that means consumers will benefit.
But this will work only if large numbers of consumers decide to do business with both retail giants. That means you will need to pay for both Amazon Prime and Walmart’s ShippingPass. It’ll cost another $50, but it’s probably worth it.