Walmart has announced that it will be purchasing Amazon competitor Jet.com for approximately $3.3 billion.
Walmart’s acquisition of Jet.com is validation that it has opened the war chest to compete against Amazon. Amazon has been pushing itself into offline channels more successfully than Walmart has pushed into online; and now Walmart is making a direct ecommerce play against Amazon. Early on, Walmart’s physical stores dominated the retail landscape. But when Amazon started to push into the physical world—distribution centers, droids for delivery, etc.—it hit close to home for Walmart, and Walmart knew it needed to make a big splash online: acquiring Jet.com.
WHAT DOES this MEAN for WALMART and AMAZON?
- Walmart Ecommerce: In 2015, Walmart’s online sales hit $13.6 billion while Amazon raked in $100 billion. Currently, only 7% of Walmart’s revenue is generated from online sales. And despite ranking #2 behind Amazon in online retail traffic, Walmart falls far behind in online sales. By acquiring Jet.com, Walmart has high hopes to increase online conversions and cart size by tapping into a new (and younger) audience.
- Battle for Millennials: According to Business Insider, Walmart primarily caters to consumers aged 45+. As Walmart taps into Jet.com’s core younger audience, it seeks to steal some of the highly-coveted—and growing—Millennial demographic from Amazon. Millennials have overtaken Baby Boomers as America’s largest generation (U.S. Census, April 2016). As digital natives, Millennials are more likely to make an online purchase vs. the general population (75% of Millennials made an online purchase in 2015 vs. 66% of the general population (Ipsos, February 2016)).
And—according to recent data from Performics and Northwestern University’s research study, the Digital Satisfaction Index™—Millennials are much more comfortable in providing personal information online while shopping vs. Baby-Boomers. This personal information drives personalized experiences and recommendations, something that Amazon currently excels at. Per the below chart, Millennials are more satisfied with Personalization than older audiences:
But Millennials are also the hardest to please online. According to the DSI, this youngest age group has issues with satisfaction around Utility, which is the usefulness of the site or app to users. Ecommerce sites like Jet.com and Amazon are striving to keep pace with Millennials’ needs. Increasing younger users’ satisfaction around Utility is a key strategy for Walmart with the acquisition of Jet.com.
- Even More Ecommerce Competition: Additionally, this acquisition will create more incentive for Amazon and Walmart/Jet.com to offer the lowest rates, best customer service and fastest delivery speed. In an era where consumers can shop anywhere and at any time, Walmart and Amazon will face off to reach the right person, in the right moment.
CONSIDERATIONS for ADVERTISERS
In light of the acquisition, marketers should keep in mind the power of retail marketplaces in driving sales. For example, recently commissioned research by Bloomreach found that of 2,000 U.S. consumers, 44% reported starting product research on Amazon.com (vs. search engines like Google) (Marketingland).
Recently, brands have seen success in leveraging retail engine paid advertising—like Amazon’s new Sponsored Search Ads—to capture and convert demand. Our advertisers have been increasingly dedicating media budget to Amazon and Hooklogic, a retail search marketing exchange that enables brands to run CPC-based paid search advertising within retail site native search results pages (e.g. Walmart.com search, a current Hooklogic partner). To illustrate, Amazon and Hooklogic made up 37% of an electronic retailer client’s paid search revenue in 2015.
Retail engine opportunities are very appealing to advertisers, as they enable us to connect to consumers at the digital point-of-sale on Amazon or Walmart.com. As competition heats up between Walmart and Amazon, we also expect more opportunities for advertisers to engage shoppers on Jet.com.
To learn more about the Jet.com acquisition, contact Performics today.