Many in the retail industry were surprised when online startup Jet.com, billed as a potential competitor to Amazon.com for e-commerce supremacy, was sold to Wal-Mart last August for $3.3 billion. The pairing of a cutting-edge digital brand like Jet and a legacy brick-and-mortar retailer like Wal-Mart didn't seem to be the perfect match. Yet seven months later, the acquisition appears to be working as intended, with Jet operating as a separate entity under the Wal-Mart umbrella.
In an interview at Shoptalk this week with Scott Friend, managing director, Bain Capital Ventures, Marc Lore, the founder of Jet.com and now president and CEO, Wal-Mart E-Commerce U.S., discussed why he sold Jet as well as how Wal-Mart is looking to grow its e-commerce business.
Accelerated Path to Reach Jet's Goals
When asked by Friend why he sold Jet to Wal-Mart, Lore responded as follows: “As a startup, you're selling pieces of the business along the way to venture capitalists. Did you sell the vision that you sold to your customers and employees? Wal-Mart accelerated the vision to reach our goals for customers and employees. Wal-Mart offered us the capital to do that. It ended up being a no-brainer.”
Lore was impressed with Wal-Mart's core values, which he admitted didn't always have the best reputation, and was able to build trust with Wal-Mart's CEO Doug McMillon and the company's board of directors. They have empowered Lore and his Jet team, headquartered in Hoboken, N.J., to run Wal-Mart's e-commerce business. Lore noted that McMillon has done the same with the three e-commerce businesses that Wal-Mart has acquired since Jet became part of the company, including Shoebuy.com, Moosejaw and ModCloth.
“We're asking those leaders to run those product categories for the entire organization,” said Lore, citing Shoebuy as an example, as its leadership team will handle for online sales of footwear for the entire Wal-Mart organization. “Giving these acquired companies the authority to control those businesses means everything to entrepreneurs to have that empowerment.”
Startup Incubator in the Works
Lore announced that Wal-Mart is launching an incubator called Store No. 8 to develop digital startups. Wal-Mart would own the startups, which would provide the world's largest company the opportunity to look further out into the future.
“It's harder to think about innovating five [years], 10 years out when investing in meeting short-term goals,” said Lore.
Store No. 8 is an example of the innovation that's taking place at Wal-Mart, which Lore credits McMillon and the executive team for.
“It's incredibly challenging for a legacy retailer to hand over the keys to a startup” noted Lore. “You need executive buy-in. Doug McMillon was a benefactor from the beginning. It [acquiring Jet] was a risky, bold move at the time, but it's working out well so far. I'm hoping to continue to prove Doug and the board correct.”
Future of E-Commerce
To close the interview, Lore was asked about the future of e-commerce, both for Wal-Mart and the industry as a whole. His answer: he's more convinced every day of the advantages of being an omnichannel retailer.
To capitalize on its omnichannel advantages, Lore has restructured Wal-Mart's e-commerce business. Jet.com and Walmart.com now share back-end logistics and merchandising, and he's created an “all-star team” compromised of the top talent between the two companies. And Lore is excited about Wal-Mart's future.
“Doug and the exec team have delivered on their promises,” Lore said. “I've been so impressed with the values of the company. It operates with the highest integrity. I've been completely converted on the value system having been in the door.”
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