To the retail community the $3 billion acquisition of Jet.com by Wal-Mart Stores Inc. has felt like an odd coupling. But Marc Lore, the co-founder of Jet and now the president and CEO of Wal-Mart’s entire e-commerce business, explained his reasoning behind agreeing to the sale.
“By selling you don’t have to worry about raising money [as a startup],” he said. By selling, Jet “could get to our vision faster.”
Lore made his remarks Monday in a presentation to a standing-room-only crowd at Shoptalk in Las Vegas—and some in attendance cheered when he took the stage.
He admitted to having some concerns about his own and Jet’s transition into Wal-Mart’s much larger business and established business culture, noting from experience that when companies are negotiating a purchase promises are made but not always kept. Lore said that hasn’t been the case with Wal-Mart’s purchase of Jet. “I’ve been blown away by the fact that everything and more that Doug said ahead of the acquisition came true,” Lore said, referring to Doug McMillon, president and CEO of Wal-Mart, who pursued the Jet deal himself.
“Acquisitions typically have a low probability of success. In the case of Wal-Mart, the CEO was the one driving it. If it was driven one level down, [it wouldn’t have been successful because] people wouldn’t want to find themselves out of a job. [But that’s] the power of bringing in a team. It was a risky, bold move at the time, but I think it is working out,” he said.
It sounds like Lore and McMillon have their goals aligned. McMillon has given Lore total responsibility over e-commerce. Several Wal-Mart executives responsible for e-commerce exited the company after Lore was brought in, and Lore’s been building his own team and reshaping job responsibilities, moving at the speed of a startup “because that’s all I know,” Lore said.
Lore and Wal-Mart have also been on an e-retail acquisition spree, buying Shoebuy Inc., Moosejaw and, just last week, ModCloth Inc. Lore says he’s targeting product categories that have high margins. “Margins on commodity stuff isn’t great, but look at fashion, where margins are 40%, 50%.”
He’s also making the executives from those companies responsible for their product category across all of Wal-Mart. For example, Shoebuy.com executives will oversee footwear for their brand as well as all of Wal-Mart.
“We’ve bought four companies now. In each case we are giving the CEO [the responsibility] to run the category across the business,” Lore said. The fourth company Lore refers to is Hayneedle Inc., which Jet acquired prior to its own acquisition. Hayneedle primarily sells home and garden goods.
Consumers will continue to see Jet and the acquired companies operating as e-commerce sites separate from Walmart.com. Behind the scenes, however, systems are being integrated and merchandisers are working their categories across all sales channels.
Walmart.com is No. 4 in the Internet Retailer 2016 Top 500 Guide.Favorite