Wal-Mart in Talks to Buy Web Retailer Jet.com for $3B
Whoa whoa whoa stop the clock ;)
Before everyone gets up in a big frenzy on the price, read the article (closely):
"It isn’t clear how much Wal-Mart would pay, but a person familiar with the matter said Jet could be valued at up to $3 billion in private markets."
That is nowhere near a statement that $3B is number from Wal-Mart. That means "someone" thinks they COULD be valued at UP TO $3B in "private markets". That "someone" could be Jet's CEO. Or their banker.
Wal-Mart isn't dumb. In fact, they're the opposite of dumb when it comes to paying for things. They wouldn't pay $3B for a failed ecommerce startup if they can let it fail and buy the assets or pay much, much less in various other scenarios.
I doubt we'll see this deal go for anywhere close to $3B, if it happens at all. This is likely a negotaition tactic to drum up interest (and/or the price) from other potential acquirers.
This buyout is based on FUD, and FUD-based investment is a recipe for disaster.
From the OP:
>But for both Jet and Wal-Mart, Amazon’s frenzy of warehouse construction and fast delivery—as quickly as one-hour—have proved formidable. The retailer has logged three straight quarters of record profit while locking in an estimated 60 million members to its $99-per-year Prime service, cultivating a loyal customer base and giving consumers fewer reasons to shop at traditional stores.
The answer is not buying a unicorn startup with seemingly no fundamental advantage over Amazon. If I were Wal-Mart, I would take the $3B and try to build a great technology organization and/or fund Wal-Mart Labs more. So much of what makes Amazon better is the data accrued over the last 18 years and the insight mined from them by their super-talented team.
And Jet.com is definitely not going to give that to Wal-Mart overnight. If I were them, I'd focus on long-term viability, not a short-term hack to placate shareholders.
Given the proposed price relative to funding raised it's likely the investors will get their money back plus a small return, employees with options will likely get nothing or perhaps a token amount (after all the preferred terms are cashed in) and the founder gets to sell off another highly unprofitable business.
This will be chalked up as a "failed" startup but at least the investors get to take their money and play another round elsewhere. For the employees this is likely not a great thing. I'm guessing when they joined a hyped up startup it was in large part because they didn't want to work for companies like WalMart and stood to strike it rich if Jet went public or hit it big. Now they could be wearing a WalMart badge and the company sold out to save the ass of its investors.
Article not behind paywall: http://nasdaq.com/article/wal-mart-in-talks-to-buy-web-retai...
What asset does Jet have that it is worth anything close to $3bn?
Loyal users? Nope. Their version of "prime" is the proverbial pig in a poke, as you need to buy that one before you can actually figure out if you like to become a longstanding customer (experience, logistics, price/value, positive surprises). Most users are just the coupon cutters who will switch to whatever next crazy person is offering loss leaders.
A strong brand? Plastering NYC subways without having launched does not mean a viable brand. Also they nowadays focus pretty much only on performance marketing. So nope.
Strong technology? Meeeh...
The rationalization at Walmart HQ probably is that with Walmart's purchasing muscle they might improve the unit economics a lot. But why buy a flash in the pan in the first place...
Jet.com was founded in 2014. How did they get enough traction to be viable when there are so many other online retailers like Amazon, and all the other brick and mortar retailers that also have large online presence.
This would make Wal-mart the biggest production Azure user in terms of actual traffic. That'd be a killer position for Microsoft to be in.
Does the sale mean F# is having its WhatsApp (Erlang) moment, in other words major industry validation?
Note Alibaba is the main investor. Ali wants to use Jet.com to compete with amazon in US market.
There are a lot of product categories I've found its impossible to compete in because jet has this combination of impossibly low prices, and stupid high cpc's on Google. I wonder if an acquisition will bring things to more sustainable levels?
I love how a 3X exit is a "disappointing end". I'll take disappointment all day long.
I bet the guy that won 100k shares of jet.com stock is excited!
Interestingly not a huge exit its "just" 3x. (Edited from 6x I looked at investment not valuation originally) For all the news around Jet taking on Amazon I'm not sure this is signaling a win for them.
I have mixed feelings about this. Jet started up next to the town where I live, and after growing for a while they moved to the town where I used to live. I'd been watching their job postings since early on, and I probably could've gotten hired early. Their recruiter recently reached out to me, so I could probably still get hired there.
If they get bought out, I'd have missed out on potentially a very nice options payout. But then I'd have to find a new job, because I definitely wouldn't want to work for Wal-Mart. So I guess I'm happy with the decision to stay where I am, despite some of the drawbacks of working for a really tiny non-startup company. (Not that there aren't good perks too.)
For those of you who spend your careers in startups, how do you feel about new owners after a buy out? If you have reservations about them, do you stick around and see how it goes, or head straight for the exit?
I have to hand it to Marc Lore. Two spectacularly unprofitable businesses, with two spectacularly large exits. If this guy had been doing startups in the late 90's, he'd probably be the worlds first trillionaire by now.
Jet is on pace to do $1B in sales this year (not profit, but gross merchandise value). Not bad for a company only selling stuff for 16 months. They aren't a direct competitor to Amazon in model, they are closer to a seamless version of Flipkart in india. My friend who works there says they see Target as their competition more so than Amazon, and that could be what Walmart sees too. I do wish we could have seen where this company could go, but likelihood is it became increasingly difficult to attract VC money in this market that is tightening.
3 billion is a hell of a price for branding.
Goes to show just how entrenched some of the negative feeling (not everywhere, but where it exists, including with many in the Amazon demographic) is about Walmart.
Wal-Mart should focus on getting rid of (transition) its old mentality management and try spending top dollar on hiring top talent from the industry. I happened to work with Wal-Mart tech teams and their hands are tied by stubborn warehouse-manual-gears mindset of upper management. Basically our company had a nightmarish experience when we were integrating our services product with their internal tech products.
All of these companies (Walmart, Bestbuy etc) are trying to compete with Amazon by offering things like price match etc. Sure it is nice to have a price match from Bestbuy and pick up your product on the same day from Bestbuy. But Amazon came back with a KO punch and offered Same-Day/One-Day shipping. I can basically order it before midnight of the previous day and have it at my doors by max 7pm the next day. Amazon has successfully created a concept of brand among household consumers. They are the Apple of household consumerism and most people don't want to buy from uncool brands. When I search for a product on Google shopping and if the price is same on Amazon and Walmart, I would pick Amazon because of "PRIME" shipping. Even if it is $1 cheaper on Walamrt I would still go for Amazon. Brand loyalty can't be bought with $3B. Brand loyalty needs to be created at grass root level.
When Jet.com came out, I often checked it against Amazon, and did make some purchases through it. But there's some odd gaps, it has no category through which I can buy Blu-rays, for example. And it has huge inventory gaps on very basic current items. I honestly forgot to keep checking what I could get through it, as the gimmick of adding up a bunch of items for savings rarely amounted to very much.
Wonder if the "tip" is part of a strategy to shop the deal, like the LinkedIn post-mortem revealed. Last I heard, Jet.com was haemorrhaging cash buying more growth with massive discounts.
Looks like it would be a good exit given how much capital they've raised: $565M per crunchbase.com/organization/jet. 6x capital in means everyone should make good money.
I'm not sure if Jet's business model is valid, or if it's valid at all.
Back in Fall 2015, I ordered two cases of water (I think 24 count in each; normal 500 mL water bottles) for $5.70 each with free two day shipping. They ended up sending me two packages via FedEx Ground (one case per box) with Jet.com branding on the boxes. I was legitimately shocked that they actually processed my order since each case was 30 pounds. They lost so much money on my order. When I checked back two weeks later, they were no longer for sale on the website.
While this is a definite failure for Jet's optimistic investors, it's likely a great opportunity for Wal-Mart to challenge Amazon, and a win for consumers. It's also a big win for OCaml.
I tried shopping at Jet and while some of the prices were very good, others were worse than Amazon, and little things like product detail information, pictures, etc., were strongly subpar. Product search was also in serious need of tuning.
Does anyone know which pieces of infrastructure (or ops) that Jet built have the most value to Wal-Mart?
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I tried to shop for Gatorade and Clif Bars on Jet recently, knowing that it's promoted itself with home products and such. What I found were comical prices ($127.10 for 21 oz. of Gatorade mix) for a poor selection, so I gave up on it. I don't really know what value Walmart gets out of this purchase other than a heavily promoted brand and the ability to go back to focusing on Amazon. It feels like Yahoo and Tumblr.
Clearly jet.com's primary user base isn't from the tech crowd. Looking at the comments, seems like a lot of people don't understand that Jet's user base is probably value-conscious consumer's that shop for household items on a recurring basis. Without knowing any numbers I'm surprised at all the backlash in the comments.
Did WSJ have the $3B clickbait title and then change it? Or did the HN submission just add the extra "for $3B"?
All the article says is that "a person familiar with the matter said Jet could be valued at up to $3 billion in private markets."
If this is a HN addition, can that be fixed?
When the article says Wal-Mart is closing stores, how does it count when they close a normal store and open a super store?
Also, at this point I feel safer buying cables and chargers from Wal-Mart. I now worry about any retailer doing fulfillment for other sellers.
I propose that Walmart needs to use their bulk purchasing power/clout, in combination with the efficiencies that Amazon has put in place, to provide lower prices. If you're going to unseat Amazon, it has to be on price.
Wal-Mart can't even leverage their ubiquitous brick and mortar presence to be un-terrible to use for ship-to-store during the two times I tried to use it. Don't think this will end up being an Amazon killer.
So it was a total growth viral sign up tactic.
To secure 250K users, they offered 20K shares or something like that.
To sign up, you had to tweet, fb share, etc....
250K users in queue enabled them to do a lot of things, but in many senses it may have been a false proxy.
Doug is a planner's planner. He wants something jet has. Perhaps growth by acquisition but I suspect more.
Maybe it's a sign Walmart is doing better than it had promised and the time is right
What happens to F# now? Jet used it heavily and championed usage.
this is excellent news. I love amazon prime, and have a hard time seeing me switching, but Amazon needs a competitor, even if it isn't huge.
I always have kept an eye on jet.com, I like it, but I have not been able to find the goods I want to buy. Even not even thinking about prices.
The tech industry seems to be primarily a vehicle to grease the wheels of importing growth from the developing world.
Walmart would be better off buying $3B of Amazon stock -- eCommerce is not their strong point.
Perhaps its all in good nature, but anything that Walmart touches I don't want to be a part of.
WTF is Jet.com? I have never heard of it, why is it worth 3B if it is not common knowledge!! Sigh!
Just Marc Lore things.
Top Tip; you can get through the WSJ paywall by googling the url after the domain and going to the top link: https://www.google.com/?q=wal-mart-in-talks-to-buy-web-retai...