In a move that will surprise nobody, Walmart announced today that it's shutting down Jet.com, the e-commerce site it bought for $3 billion to help it compete against Amazon.
Walmart's move has been long in the making. After acquiring the so-called "Amazon killer" in 2016, Walmart pivoted its strategy towards a "multi-channel" model that experts see as the future of digital sales. Instead of ordering online and waiting for your package to arrive within a few days, as is customary with Amazon, customers have a choice to order and pick-up their items — including groceries — from a nearby Walmart the same day. They can also return any Walmart.com orders to physical locations, speeding up the whole process.
That strategy of offering customers more choice and convenience is one that's difficult for Amazon to compete with because Walmart already reaches the vast majority of Americans with its retail footprint. But the new strategy falls in stark contrast with Jet.
Jet sucked — Jet's entire business model was centered around orders being delivered to customers from centralized warehouses, like Amazon. The big "innovation" at Jet, though, was that it's more cost-effective to ship multiple items in every box, so Jet.com offered customers savings on items if they were willing to fill their carts and buy a few things at once. Customers could also save if they were willing to opt out of free returns — an option Amazon now offers.
Critics panned Jet's unique way of passing on savings because the savings a customer earned varied with each product in their cart. Adding a bottle of shampoo might save you 20 cents on the toilet paper already in your cart, for instance. But sometimes it'd only be 10 cents, or no savings at all. The concept created a lot of mental work for customers and wasn't easy to figure out. Jet had also experimented with charging customers an annual fee for access to the site but killed that off.
Walmart has said in the past that the Jet acquisition was more about gaining the expertise of its CEO Marc Lore than owning the site itself, which was still quite a new brand at the time. Jet proved an expensive and ultimately major waste of time, however, with Walmart redesigning the site multiple times and killing off a slew of Jet experiments over the years.
Walmart seems to have realized it makes more sense to simply unify around its existing brand that everyone knows.
The Wall Street Journal has reported that Walmart's e-commerce operation loses about $2 billion annually. Killing Jet is likely part of efforts to slow the bleeding. The retail giant as a whole made a killing in the first three months of 2020 thanks to coronavirus, with revenue of $134 billion, up 8.6 percent over the previous year. Contrast that to Amazon's $75 billion in sales for the same period.
Amazon is playing catch-up for once — Walmart's new multi-channel model looks so smart that you can see signs of Amazon trying to compete with Walmart instead of the other way around. Besides racing to build more and more warehouses close to customers, Amazon now allows customers to return packages at Kohl's stores and Amazon Lockers. It acquired Whole Foods to reach customers with fresh groceries, like Walmart already can. And it's building out Amazon Go stores.
Granted Amazon is still much larger if we're talking exclusively about online deliveries, but it seems like Walmart is deciding that's okay.