Executive Briefings

Can Walmart's Expensive New E-Commerce Operation Compete With Amazon?

A recent acquisition spree including Jet.com has given the retail giant much-needed digital chops.

Can Walmart's Expensive New E-Commerce Operation Compete With Amazon?

Last summer, Marc Lore, founder and chief executive officer of e-commerce startup Jet.com Inc., sat down to record a private video for the top officials of the world's largest retailer: Walmart. In the video, meant for Walmart executives and board members who weren't yet part of weeks of secret negotiations between the companies, Lore stares earnestly into the camera and shows off his Bentonville bona fides. After humblebragging about reading every annual report since 1972, he says he's been "struck by Walmart's maniacal focus" over its storied 54-year history.

But Lore's 40-minute presentation doesn't hold back about the threat posed by its most fearsome and increasingly powerful archrival. “AMAZON IS DOMINATING” reads a slide on a large screen behind him. In the video, Lore presents a plan to bet Walmart’s future not on e-commerce standbys such as books, electronics, and toys, but on product areas only now becoming popular online, including apparel, fresh food, and “everyday essentials” like drugstore items. “We’ll need to take the offensive, swim upstream,” Lore says. “As Sam Walton said, ‘Opportunity lies in the opposite direction.’ ”

The video worked exceedingly well. In August, Walmart Stores Inc. announced it would acquire Jet.com for $3.3bn in cash and stock. It was an extraordinary sum for a 15-month-old, purple-hued website that was struggling to retain customers and is still far from making a profit. Even more astonishing, Lore and his management team in Hoboken, N.J., were put in charge of Walmart’s entire domestic e-commerce operation, overseeing more than 15,000 employees in Silicon Valley, Boston, Omaha, and its home office in Arkansas. They were assigned perhaps the most urgent rescue mission in business today: Repurpose Walmart’s historically underachieving internet operation to compete in the age of Amazon. “Amazon has run away with it, and Walmart has not executed well,” says Scot Wingo, chief executive officer of Channel Advisor Corp., which advises brands and merchants on how to sell online. “That’s what Marc Lore has inherited.”

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Last summer, Marc Lore, founder and chief executive officer of e-commerce startup Jet.com Inc., sat down to record a private video for the top officials of the world's largest retailer: Walmart. In the video, meant for Walmart executives and board members who weren't yet part of weeks of secret negotiations between the companies, Lore stares earnestly into the camera and shows off his Bentonville bona fides. After humblebragging about reading every annual report since 1972, he says he's been "struck by Walmart's maniacal focus" over its storied 54-year history.

But Lore's 40-minute presentation doesn't hold back about the threat posed by its most fearsome and increasingly powerful archrival. “AMAZON IS DOMINATING” reads a slide on a large screen behind him. In the video, Lore presents a plan to bet Walmart’s future not on e-commerce standbys such as books, electronics, and toys, but on product areas only now becoming popular online, including apparel, fresh food, and “everyday essentials” like drugstore items. “We’ll need to take the offensive, swim upstream,” Lore says. “As Sam Walton said, ‘Opportunity lies in the opposite direction.’ ”

The video worked exceedingly well. In August, Walmart Stores Inc. announced it would acquire Jet.com for $3.3bn in cash and stock. It was an extraordinary sum for a 15-month-old, purple-hued website that was struggling to retain customers and is still far from making a profit. Even more astonishing, Lore and his management team in Hoboken, N.J., were put in charge of Walmart’s entire domestic e-commerce operation, overseeing more than 15,000 employees in Silicon Valley, Boston, Omaha, and its home office in Arkansas. They were assigned perhaps the most urgent rescue mission in business today: Repurpose Walmart’s historically underachieving internet operation to compete in the age of Amazon. “Amazon has run away with it, and Walmart has not executed well,” says Scot Wingo, chief executive officer of Channel Advisor Corp., which advises brands and merchants on how to sell online. “That’s what Marc Lore has inherited.”

Read Full Article

Can Walmart's Expensive New E-Commerce Operation Compete With Amazon?