So much for Walmart’s big and expensive effort to take on Amazon with a digitally-native brand. Today, the retail giant announced in its quarterly report that it would be discontinuing Jet.com, the online-only marketplace that it acquired for $3 billion when it was just over one year old.
“Due to continued strength of the Walmart.com brand, the company will discontinue Jet.com,” the company said in a short statement. “The acquisition of Jet.com nearly four years ago was critical to accelerating our omni strategy.”
The company also reported earnings that saw growth of less than 10% in its core US market, and the company withdrawing guidance for fiscal 2021.
“The company’s net sales and operating results were significantly affected by the outbreak of COVID-19,” Walmart said. “Unprecedented demand for products across multiple categories led to strong top-line results. Certain incremental costs negatively affected operating income, including costs associated with enhanced wages and benefits as well as safety and sanitation.” Total revenue was $134.6 billion, an increase of $10.7 billion, or 8.6%.
Although the COVID-19 pandemic has led to a surge of people shopping online, a number of companies, including Amazon and eBay have found that handling business at the moment can prove to come with more overhead costs, and that’s before considering what the larger effects of a collapsed economy will have on overall sales. So while it might seem counterintuitive to get rid of Jet.com at a time like this, it’s about cost cutting ultimately because of that bigger picture.
When Walmart acquired Jet.com in 2016, the big ambition was to give the giant retailer a complement to its brick-and-mortar stores to compete better against Amazon and its growing presence as a primary shopping destination. Buying Jet.com was also about bringing on its experienced founder and leader Marc Lore to lead both Jet and Walmart online
“This is Walmart being even more committed to winning in e-commerce,” said Doug McMillon, president and CEO of Walmart, in a conference call with investors at the time.
But fast forward to today, amid all the strains that COVID-19 is putting on the retail sector and the wider economy, and the discontinuation is the final chapter in what ultimately was a problematic endeavour for the company that it tried to restructure to make more effective. That included, last year, fully integrating Jet’s teams into its own, while still keeping the brand; and also axing various Jet experiments like Jet Black, a personal shopping service.
In the meantime, it’s been working on adding more Walmart.com perks such as piloting a two-hour deliver service at the end of last month.
More to come.