May 19, 2020

Walmart to Jettison Jet.com: Looking Back at Jet’s Trajectory and Impact

Walmart noted in their Q1 earnings release that Walmart U.S. ecommerce sales grew 74% in Q1 of 2020 with strong results for grocery pickup and delivery services, and the Walmart.com marketplace.

With all of that ecommerce growth, Walmart made the decision to “discontinue Jet.com.”

How should we think about this conundrum? With pandemic shopping driving huge ecommerce growth and accelerating a total retail sales shift from brick-and-mortar to online, why is Walmart shutting down their $3.3 billion dollar digitally-native brand bought to compete against Amazon?

Here I’ll take a look at the numbers and at what Walmart has said publicly via earnings presentations, press releases, and comments to the media. My colleague and former Walmart employee, Newel Cobb, will share his experience working inside Walmart.com shortly after the acquisition of Jet about his own thoughts on the origins and demise of Jet.com.

From the numbers: Jet’s trajectory

We knew this was coming

Some might argue this decision to kill Jet.com was already made when Walmart effectively absorbed the remaining Jet.com staff into new roles at Walmart as reported by the Wall Street Journal in June of 2019. I would argue the decision was made much earlier—in 2017—when monthly traffic to Jet plummeted and never reversed course. (See graph below from MarketplacePulse.)

Jet.com monthly visits, Pattern

But let’s first step back to 2016 when the acquisition of Jet.com was announced and what Walmart said they were hoping to accomplish.

Walmart was going to revive Jet initially

Doug McMillon, President and CEO, Wal-Mart Stores, Inc., said on the Aug. 8, 2016 acquisition announcement that Jet.com will enable Walmart to reach its ecommerce goals, and vice versa.

“Walmart.com will grow faster, the seamless shopping experience we’re pursuing will happen quicker, and we’ll enable the Jet brand to be even more successful in a shorter period of time. Our customers will win. It’s another jolt of entrepreneurial spirit being injected into Walmart,” McMillon said.

Indeed, Walmart got the infusion of fresh ideas and expertise specifically from the leadership team of co-founder and CEO Marc Lore, together with fellow co-founders Mike Hanrahan and Nate Faust, as well as the technology team of Jet.com. More on this later.

Per McMillon: “Walmart and Jet will maintain distinct brands, with Walmart.com focusing on delivering the company’s Everyday Low Price strategy, while Jet will continue to provide a unique and differentiated customer experience with curated assortment.”

Jet served its purpose for Walmart

I think from 2016 to present, Walmart has changed their view. I believe Walmart has realized that Jet.com was a great technology infusion and cannibalized Jet’s tech teams to accelerate Walmart’s initiatives. I believe this was a concerted decision and the pandemic accelerated the demise of Jet.com as the cost to maintain and support two distinct brands became unsustainable.

In their Q1 2020 earnings release, Walmart CFO Brett Biggs addressed why Walmart was withdrawing future year guidance for 2021, and I believe the uncertainty with the last nail in the coffin for Jet.

“The decision to withdraw guidance reflects significant uncertainty around several key external variables and their potential impact on our business and the global economy, including: the duration and intensity of the COVID- 19 health crisis globally, the length and impact of stay-at-home orders, the scale and duration of economic stimulus, employment trends and consumer confidence,” Biggs said.

What about current brands on Jet?

So what about brands—and Pattern brands—still on the platform? Well, we’ve always been cautious at recommending Jet to our partners (and even wrote previously that our honest overall opinion for brands about Jet was to avoid devoting time and resources to Jet until the data showed otherwise). This seems like a wise recommendation looking back, and we will now meet with our brand partners still selling on Jet.com to plan the transition off and final sunset of support.

Newel Cobb, a current Senior Brand Manager at Pattern who is a former Walmart.com Category Specialist and Technology product manager, shares his opinion on Jet’s demise. As a category specialist, he supported the baby category on both Walmart.com and Jet.com. As a product manager, he worked on the integration of Walmart stores with Jet.com and Walmart.com.

From a former Walmart employee: What this means

It was always a talent-grab, not a market-share grab

Many Walmart.com employees both past and present will tell you that the Jet acquisition was more of a talent grab than it was a market-share grab. Even back in 2017, everyone knew Jet would eventually go the way of the dodo.

After Jet was acquired, Walmart integrated most of the user design product managers and engineers into working on the Walmart websites and apps. This was talent that Walmart's home office in Bentonville was lacking. Bentonville had been the biggest fish in the pond for decades and needed new talent if they were to compete with the rising retail star that was Amazon.

Besides the technical product managers and engineers, one of the greatest things that Jet brought over was their senior leadership team, including Marc Lore and others. They implemented the Category Specialist Program. The idea was to hire 300 to 1,000 mini-associate buyers who would know their category so well that they could compete with the automation offered by Amazon technology. Almost all were fresh out of college, and came from top 20 schools. The name-brand Jet was instrumental in acquiring this talent.

There was little incentive to grow Jet

Most of the business managers became responsible for both Walmart and Jet’s profit and losses. However, because the Walmart P&L was often 10 times bigger than the Jet P&L for any given category, they were not incentivized to prioritize Jet.

Originally, Walmart tried to integrate Jet technologies into the Walmart systems, but eventually started from scratch. They started to use Jet warehouses for Walmart product to move forward.

Jet helped Walmart acquire “cool” brands and re-brand

Soon after the acquisition, it became clear that Jet was only really there to service the New York metropolitan area and some other metropolitan areas, as well as allow Walmart to acquire "cool" brands that were otherwise hesitant to join the website.

The idea was, if we could get a brand like Nike on Jet, we could get them on Walmart.com as well. Walmart also used the Jet name to acquire more top talent that were otherwise hesitant to attach their name to Walmart. Jet also allowed Walmart to experiment with cool ideas such as JetBlack without tarnishing the Walmart brand.

As time went on, Walmart.com learned to re-brand themselves as more than just a local super-center's online website. As their experience became more premium, the need for Jet became less and less. With the exception of some original quirks (such as Save As You Buy), Walmart.com used Jet's talent to become what Jet was aiming to be.

Our opinion? The Jet acquisition was not a failure

Overall, the Jet acquisition was not a failure, as the culture and flavor of Jet defined what Walmart.com has become today.

We hope this was an informative look back at Jet.com and look forward to continuing to test and learn as we help our brand partners with profitable ecommerce growth and control on any marketplace. Contact us with any questions, comments, or to let us know what new trends you’re seeing in ecommerce.