Yesterday, Walmart dropped a bombshell when they announced that they would be consolidating Jet.com and Walmart.com operations. As part of the consolidation, several major changes were announced within the company's management including the elimination of the Jet division's president role held by executive Simon Belsham and the reassignment of other executives.
While perhaps not terribly surprising to industry watchers given data about divisional results, the de-prioritization of Jet.com within Walmart's portfolio was still big news. It has only been a few years since Walmart purchased the company for a whopping $3.3 billion in a deal that was supposed to expand Walmart's reach. As the deal closed in 2016, CEO Doug McMillion reinforced this: "Together, both Jet.com and Walmart.com will be able to leverage each other's assets to grow the ways we serve customers."
So what does all this mean for Walmart and suppliers? Here are some thoughts...
The Change Is The Right Move For Walmart
Jet.com sales are now estimated by Kantar to be $689 million / year, down from $1 billion in 2016. Jet is no longer big enough to be treated as a separate HQ within Walmart, an over $500 billion dollar company as of 2018. A separate HQ creates unnecessary complexity, both among internal and external stakeholders. With the consolidation, Walmart has acknowledged that Jet is a peer in many ways with other recent acquisitions like ModCloth, Hayneedle, and Moosejaw.
In light of the recent sales declines, did Walmart overpay for Jet? The jury is still out on that one. In 2016, Walmart was clearly losing the eCommerce battle vs. behemoth Amazon. The acquisition of Jet brought them a stellar and highly experienced eCommerce management team including CEO Marc Lore who also founded Diapers.com (which was later sold to Amazon). Lore continues to lead Walmart's overall eCommerce effort which is now on a much stronger trajectory.
It May Be Good For You Too
If you're a big CPG or a CPG looking to scale, you're likely either working with Walmart or you have plans to do so sometime in the future. As a Walmart supplier, you might have previously felt pressure to support your customer by investing resources in building and driving your brand on Jet.com.
The recent news is an explicit deprioritization of Jet within the Walmart ecosystem and this takes some of the pressure off of you. Unless Walmart specifically comes to you with a Jet-related initiative, you can almost certainly focus your efforts elsewhere including on driving Walmart.com and Amazon.com, the two biggest marketplaces in most categories.
As you consider options, we'd love to help. Bold Retail is one of the few eCommerce companies with deep experience across Walmart and Amazon ecosystems (along with many others). Please fill out the contact form linked below and we'll be in touch within 24 hours!
