After years of being outgunned in the online shopping realm by, retailing giant Wal-Mart made a major play Monday to boost its e-commerce firepower. The company said it has agreed to purchase startup for $3.3 billion, a move aimed at reaching a wider audience online.

The deal is one of Wal-Mart’s most ambitious efforts yet to transform itself into a digital shopping juggernaut. Last year, the company pledged to spend about $2 billion over two years to enhance its online shopping capabilities with initiatives such as building more fulfillment centers and expanding its grocery pickup program. This cash-and-stock deal marks a significantly larger investment in building a digital-centric future.

Jet is an online general store that debuted last summer, making the lofty promise that it would deliver the best deals on the internet through a unique approach to pricing. Prices at Jet are determined by the specific combination of items in your shopping basket, instead of on an item-by-item basis. Jet has indeed grown quickly, offering 12 million items for sale and averaging about 25,000 orders processed each day. But it has hardly threatened to knock Amazon off its perch as the leader in online shopping, and it has been burning through cash rapidly as it spends big on marketing and infrastructure.


Data from NPD Group offers a window into why Jet may have been attractive to Wal-Mart. The market research firm found that only one-fifth of Jet shoppers also shopped at in the last six months, meaning the big-box behemoth would gain access to new customers by bringing Jet under its wing. Plus, Jet customers are affluent: They are more likely than other online shoppers to have incomes of greater than $150,000 a year, NPD found.

In a media release announcing the deal, the companies touted the inroads Jet has made in creating a brand that has connected with millennials – a demographic that Wal-Mart and virtually every other retailer is eager to court. The companies said they plan to leverage each other’s technology solutions, and Jet could also benefit from Wal-Mart’s highly developed supply chain and the more established retailer’s formidable buying power.

These could be powerful tools for a startup that has hit some stumbling blocks despite entering the e-commerce market as one of the most well-funded startups in history. Jet initially launched with a plan to be a membership only retailer, where all customers would pay $50 a year to access its rock-bottom prices. The idea was that profit would come exclusively from that fee. In theory, its item prices could be lower because it wouldn’t try to make a profit from them. But Jet was forced to drop the membership fee within months, likely a sign that the business model just didn’t get traction with shoppers. Late last year, the company reportedly received a much smaller valuation during a venture funding round than it had before.


In a media release, Wal-Mart chief executive Doug McMillon called the deal with Jet “another jolt of entrepreneurial spirit being injected into Wal-Mart.” It also marks the latest twist in the unusual career arc of Jet’s founder, Marc Lore. Lore built Quidsi, a suite of shopping sites that included After reportedly engaging in a punishing price war with Amazon, Quidsi was bought by Amazon in 2011 for more than $500 million. (Jeffrey P. Bezos, chief executive of Amazon, owns The Washington Post.)

Lore has said the idea for Jet was grounded largely in his lessons from Quidsi. In particular, he came to believe that winning on price – not service – was the bedrock of a successful and durable e-commerce business. Jet was supposed to be different from Quidsi, and yet the two businesses have striking parallels: Each startup was snapped up by a retailing behemoth looking to expand its empire.

The deal with Jet illustrates how determined Wal-Mart is to become a more competitive player in the digital shopping wars. Its recent sales patterns underscore how urgent it is for the retailer to get some momentum in that channel. Global e-commerce sales grew just 12 percent last year, a slowdown from the 22 percent growth the company recorded in 2014.

As part of its efforts to corner a bigger share of the online shopping business, Wal-Mart has been investing in programs such as grocery pick-up, a hybrid of digital and physical shopping in which you order groceries online and pick them up at a local store. It also recently expanded the pilot of ShippingPass, a membership program that offers free two-day shipping on all purchases and is widely seen as an answer to Amazon Prime.

The Wall Street Journal had reported last week that Wal-Mart was poised to acquire Jet, so the deal likely did not come as a surprise to investors. The companies said the deal is expected to close sometime this year.