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E-commerce

Wal-Mart in $US3b-plus purchase of Jet.com

Wal-Mart says it has completed its deal to buy fast-growing Jet.com for $US3 billion ($A3.98b) in cash plus $US300 million in stock, an acquisition aimed at helping the world’s largest retailer attract younger and more affluent customers to drive online sales.

The hefty price tag shows how heavily Wal-Mart is willing to invest as it tries to boost online sales that totaled $US13.7 billion last year – still just a fraction of the company’s annual revenue.

While Wal-Mart and Jet.com will operate as separate brands, Wal-Mart has said it will incorporate some of Jet.com’s “smart technology” that lowers prices in real time by looking for ways to cut costs.

As part of the deal, which was announced in early August, Jet.com co-founder and CEO Marc Lore will oversee both that site and Walmart.com, and will report to Wal-Mart CEO Doug McMillon. Lore will serve as executive vice president at Wal-Mart and president and CEO of Wal-Mart’s e-commerce business in the US.

Lore brings to the role a rich e-commerce resume as founder of Quidsi, the parent of Diapers.com, which was bought by Amazon for $US500 million in 2010. As part of the stock portion of the deal, Lore received 3.55 million shares of restricted Wal-Mart common stock to be paid over five years.

The exact value depends on Wal-Mart’s share price. But based on Monday’s closing price of $US72.09, the shares would have a current worth of nearly $US256 million.

Jet’s pricing technology is built on an 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 shoppers’ home.

So shoppers are encouraged to add more to build a more efficient cart and buy items labelled “smart cart” for more savings.

Analysts say that the deal still won’t enable Wal-Mart to catch up to online leader Amazon.com in sales, but will help narrow the gap and should widen the distance between Wal-Mart and other online rivals.

For Jet.com, which had been pouring money into splashy TV ads and other marketing, being owned by Wal-Mart should accelerate its path to profitability.

AP

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