Walmart Needs $3.3 Billion Buy to Jump-Start Web Sales

NEWS ANALYSIS: With its in-house e-commerce efforts going nowhere, Walmart needs a way to challenge Amazon if it wants to remain relevant in online retailing.

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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 organization.

"Mark Lore is an e-commerce legend and there are few people who, if tasked with doubling or tripling, 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

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.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...