Explain Why Walmart Acquired Jet.Com

1. Explain why Walmart acquired jet.com

WMT is nowadays the biggest company in the world both in sales and employees. Data shows that WMT is quite ahead from its direct competitors (Kroeger, Costco…) having more than $250 billion in sales compared to $120 billion achieved by the second ranked biggest food/CPG retailer. It is well known that many retail stores competing in sectors such as bookstores or electronics have been affected by the massive growth of e-commerce leading to two possible outcomes: radical change of the business or disappearing. Nobody would believe that the same could happen with the CPG Retailing Sector, until players like Jet (focused on urban Millennials) or AMZ (huge logistics network and main online retailer) started to enter in the food industry.

WMT goal is to win value-conscious shoppers with everyday low prices by keeping costs low. To do so, WMT main strategy was to have really big shops located in non-urban areas. However, the sector is changing and if WMT wanted to keep being leader in the CPG industry, it needed to expand their online business and to target Millennials. Acquiring JET, WMT would be benefited in the following ways :

• WMT can take JET’s e-commerce know-how: specifically their algorithm of reducing prices as the customer shops online. That matches perfectly WTM’s goal of offering everyday low prices. With this acquisition, WMT should be able to improve its e-commerce operations and also is able to bring in a new team of e-commerce executives.

• Acquiring JET, WMT could now target Millennials and urban customers, complementing so their original customer base.

• WMT needs to grow its e-commerce business in order to be able to compete against other big players like AMZ. Buying JET would allow them to offer a wider range of products, in a simpler way and at the lowest price possible.

2. Explain why Amazon acquired Whole Foods

AMZ is the biggest online retailer in the world. It is very well known not only because of their very wide range of products but also because of their fast deliveries. AMZ has been able to deliver products in less than 2 hours in big cities like New York, Paris or Barcelona. AMZ has taken over different retailing sector like electronics or books, and it also started operating in Food Retailing creating different business lines like Amazon Pantry or Amazon Fresh. However, their market share was not big enough to be considered a big player in the industry. By acquiring WFM, AMZ would be able to establish itself as a big player in the industry due to different reasons :

• AMZ buys the 10th most important food/CPG group when it comes to sales.

• By acquiring WFM, AMZ gets physical presence in more than 20 states. This added to the extended logistic network that they already have, leads to a quick local grocery delivery system.

• AMZ is able to implement their advanced technology of picking, paying and delivering in all of those new WFM locations, giving the customer the best experience possible.

• WFM is known because of their organic products. Quality and customer satisfaction is a must for WFM, same as for AMZ (Most customer centric company in the world).

3. Explain why the stock prices of other food/CPG retailers and wholesalers declined when the Amazon-Whole Foods deal was announced and declined even further when the FTC approved the deal about 2 months later.

The purchase of WFM done by AMZ was a threat for the other food retailers and wholesalers due to the huge cost efficiency that AMZ has. AMZ has a huge logistics network that now can be used for WFM, meaning that they could incur in scale economies, lowering the transportation costs and therefore lowering the products’ price. WFM is known for mainly selling organic products at prices higher than average. Right after AMZ acquired WFM, it was announced that the best-selling groceries were going to suffer a price reduction and that WFM customers could benefit from some of the Amazon Prime customer reward features. That was a huge shock for the other players in the food industry since they do not have the capacity to lower costs that drastically.

4. Why did