6/26

With the Walmart-Jet.com deal decided (if not yet sealed), some thoughts on what could happen and the implications for supply chains.

I am still not convinced this is the right acquisition to spur Walmart's ecommerce ambitions.  But with the purchase Walmart picks up at least three important assets:

1. Marc Lore the founder of Jet.com is a successful ecommerce strategist and start-up leader.  No one has a better handle on what works.  No one is more innovative or prudently risk-taking in developing new ecommerce tactics and techniques.  He has a good handle on technology, supply chain, and finance.  He has gathered a good team.

2. Jet.com has an online tool that (in my words) gives consumers the ability to optimize their pull-signals around the current strengths of the supply network. So, for example, the more proximate the consumer to a Point-of-Distribution, the less costly the item. The more products that can be shipped in a single delivery, the lower the total price. Voluntarily forsaking free-returns saves more money. You see the logic. I have not seen data that totally convinces me that this software is generating more sustainable "pull".  But I'm guessing (hoping) Walmart has seen enough to be confident of future implications. I agree with the logic. (Here's how the Associated Press described the tool: "Jet.com is built on a real-time pricing algorithm that determines which sellers are the most efficient in value and shipping and adjusts prices based on what items are in the checkout cart, as well as how far the desired products are from the shopper's home. So as shoppers throw items in their cart, they're encouraged to add more to build a more efficient cart and buy items labeled "smart cart" for more savings." You can also read Jet's own explanation.)

3. Jet.com allegedly has grown quickly among younger, affluent, urban audiences. Media reports suggest that about 350,000 new customers per month have recently been accessing Jet.com. As a privately-held start-up we don't know much for sure, but -- again -- I'm guessing there was enough of a beachhead among a set of consumers Walmart does not usually engage that the value proposition made sense in Bentonville.

There are other assets.  But are these big three worth roughly $1.1 billion each?

It depends on what happens next.  From a branding and merchandising perspective Jet.com will probably do better the more it is separated from Walmart.  Yet from a supply chain perspective -- and especially from procurement and last mile fulfillment angles -- this connection with the world's largest retailer could be very helpful.

Amazon's Prime program could be characterized as preserving the magic of the supply chain.  After you pay the annual subscription, products magically appear.  The customer can be delighted by a Sunday afternoon delivery that cost "nothing."  Profound bliss.

Jet.com's "real time savings" program involves the customer in making choices to match need-and-capability, earning savings as products and delivery options are selected.  Instead of magic, rewards for virtue, restraint, and intelligence. Deeply satisfying.

In today's world there may be substantial markets -- not just micro-markets -- for both kinds of consumer experience.