Three years after spending $3.3 billion to buy e-commerce upstart Jet.com, Walmart (WMT) says it plans to integrate Jet's various teams into its main e-commerce business, and suggests it will continue "repositioning" Jet as a platform for reaching consumers in urban areas where Walmart has few or no stores (for example, New York City).
Walmart is doing its best to argue that this strategy change, which comes a little over a year after the company said it would pare marketing investments in Jet, doesn't mean the Jet acquisition is a failure. The company notes that Jet's technology and talent -- including its smart cart tech, which adjusts prices and shipping fees based on factors such as order size and item location -- has been instrumental in driving Walmart.com's e-commerce growth and enabling the rollout of its free two-day and (more recently) one-day shipping services.
Still, it's hard not to look at Walmart's actions as a strategic retreat, given that the company had once trumpeted Jet.com's standalone business as a key part of its e-commerce strategy, particularly when it came to winning over the types of millennials who are hooked on Amazon Prime. And to a degree, the Jet pullback is fresh evidence of how Walmart -- though seeing good traction for its online grocery pickup efforts -- still faces an uphill battle when it comes to wresting significant share from Amazon.com (AMZN) in traditional e-commerce.
The Jet.com announcement arrived just a couple days after The Information shared data from research firm Marketplace Pulse that indicates Walmart still only provides free two-day shipping for about 2.7 million of the 45 million items available on its website. Amazon, by comparison, said last year that over 100 million items are eligible for free two-day shipping via Prime. More recently, it announced earlier this month that over 10 million are now already eligible for free one-day shipping, just as Amazon kicks off an effort to make one-day shipping the norm for Prime orders.
Worth remembering here: Research firm eMarketer estimates that Walmart's U.S. e-commerce sales (though expected to grow 33% this year) will only claim a 4.6% market share in terms of gross merchandise volume (GMV). Amazon, for its part, is expected to see its GMV share grow to 47%.
To be fair, there is a lot to like about Walmart's burgeoning online grocery pickup efforts. This is a part of Walmart's e-commerce business that can leverage the scale, geographic reach and cost-competitiveness of Walmart's bricks-and-mortar empire, and evidence has been growing that these services are proving popular not only with Walmart's existing customer base, but with many people who don't frequently shop at Walmart stores. Research firm Cowen estimates that grocery pickup will account for about a third of Walmart's online sales next year.
Still, it goes without saying that while online grocery pickup can be more convenient than buying groceries the old-fashioned way, it's not as convenient as having them delivered to your door. For that reason, Walmart's grocery pickup momentum is arguably more of a headache for traditional grocery rivals such as Target (TGT) , Kroger (KR) and Aldi than it is for Amazon.
For all of Walmart's considerable strengths in bricks-and-mortar retail, it has remained a second-tier player in U.S. online retail relative to Amazon, as Amazon continues leveraging Prime, its seller marketplace and the scale, reach and efficiency of its fulfillment/logistics infrastructure (an infrastructure built from the ground up for e-commerce, unlike Walmart's) to maintain its U.S. dominance. And when push came to shove, Walmart realized that Jet.com's standalone business wasn't going to do much to change this.