On Monday, Wal-Mart announced that the company would acquire Jet.com for $3.3 billion. Wal-Mart believes the acquisition will broaden their customer base and add additional capabilities, while Jet CEO Marc Lore appears excited about the scale of Wal-Mart’s purchasing and distribution abilities. Lore has openly expressed his ambition to take on Amazon, so how might this merger help him and his new partners at Wal-Mart achieve this goal? Using 1010data’s Market Insights from July 2015 to YTD, I compared Jet, Wal-Mart and Amazon to see what kind of opportunities, if any, might exist for the new partners as they compete with the e-tailing giant.
Amazon: The Behemoth
There is no denying Amazon’s command of the online retail space. Looking at the second quarter of 2016, Jet and Wal-Mart, combined, only own 7 percent of the online retail market when compared to Amazon. On top of that, 85 percent of both Jet and Wal-Mart’s customers have bought from Amazon in the past year.
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Not only does Amazon currently own most of the market, but they also benefit from high conversion rates. 1010data calculates conversion rates by dividing units sold by the number of products views. Based on this calculation, Jet.com’s customers are more likely to purchase after viewing a product than Walmart.com’s customers are. However, both companies still lag behind Amazon’s ability to convert views into purchases – both Amazon Direct and Amazon Marketplace have higher conversion rates than either Jet or Wal-Mart. Perhaps Jet’s greater ability to convert customers—relative to its new owner—will inform and improve Wal-Mart’s strategy, giving both a better chance to reach for the high bar set by Amazon.
In the near-term, Wal-Mart’s acquisition likely will do little to Amazon’s bottom line, but are there any areas where Wal-Mart can capitalize on Jet’s strengths to close the gap?
Some Surprising Areas of Opportunity
When looking into specific categories, we identified some areas where Jet actually has an advantage over Amazon. The chart below indicates that there are a few categories where Jet’s users are spending more than both Amazon and Wal-Mart customers. On average, Jet’s customers earn more money than Wal-Mart customers, which explains their propensity to spend more. Using our data, we found that Jet customers also spend more than Amazon customers in certain high-end categories, like Fragrance, Athletic Shoes, and Vacuums. Wal-Mart would be wise to pour resources into Jet’s categories like these where they already have an upper hand over Amazon.
All in all, this is an exciting acquisition: it’s an opportunity to make both Wal-Mart and Jet more successful by merging technologies and resources. Will there be an imminent threat to Amazon’s business? No. Amazon has a significant lead that will take time to catch up to. Working together against Amazon likely gives them the opportunity to target those categories in which Amazon seems to be vulnerable. If Wal-Mart and Jet can capitalize on some categories where they excel over Amazon, they position themselves to chip away at Amazon’s business in a more impactful way. Even though this deal is not likely to have a substantial impact on Wal-Mart and Jet’s revenue in the near-term, the merger highlights Wal-Mart’s commitment to winning in e-commerce and the importance of doing so. For more articles about e-commerce, follow our blog at https://www.1010data.com/company/blog/.
1010data utilizes a number of sources of consumer spending data representing millions of consumers to provide an accurate assessment of online and offline retail sales, market share, and more. Our data enables clients to track consumer behavior using high-quality, granular datasets that are often difficult to source, cleanse, and consolidate.