Walmart and Jet.com Failed “Marketing 101”
The Robin Report - Walmart Jet Gets an F in Marketing

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The leadership team at Walmart failed to develop a positioning strategy for the two brands. It appeared that the strategy was simply to operate the two brands separately on the front end (the consumer facing functions), while integrating the back-end operations, creating a synergy for both. As I wrote in 2016, analyzing Walmart (Jet) versus Amazon in terms of its online power, there were some key metric differences.

Jet.com gets:

  • Walmart\’s size and deep pockets, (pushing to three-quarters of a trillion dollars vs. about a hundred billion for Amazon).
  • Its global scale.
  • Its ability to turn its 10,000 stores worldwide-4500 in the U.S. (accessible within 4.2 minutes for 90 percent of the population) – into the dual function of retail stores and distribution centers. Amazon currently has about 180 distribution centers in the U.S. and is just beginning to test physical stores. By comparison, Amazon\’s distribution/fulfillment centers are within 20 miles of 31 percent of the population.

Walmart gets:

  • Jet.com\’s demonstrated ability to scale with speed, reaching $1 billion in run-rate Gross Merchandise Value (GMV) and offering 12 million SKUs in its first year.
  • A growing customer base of urban and millennial customers with more than 400,000 new shoppers added monthly and an average of 25,000 daily processed orders.
  • Best-in-class technology that rewards customers in real time with savings on items that are bought and shipped together, thereby reducing the supply chain and logistics costs often buried in the price of goods.
  • A select group of more than 2,400 retailer and brand partners tailored to create an attractive and distinctive assortment for consumers.

Retrospective Insights

Probably the most important \”get\” for Jet, was Walmart\’s deep pockets which CEO and founder, Marc Lore, needed to further scale his business, which according to many experts was financially \”iffy\” when Walmart essentially bailed them out by acquiring the brand.

The big get for Walmart was an overnight new and rapidly growing (at the time) young urban and more affluent customer base. And the real bonus would be the brilliant tech-savvy Lore and his teams who would jump-start Walmart\’s slow and lumbering online growth.

[callout]With the loss of billions on Lore’s side of the business, McMillon is now reining everybody in on cost-cutting, selling off Lore’s brainchildren, but surprisingly keeping Lore in charge of all e-commerce.[/callout]

So, simply said, for Lore, the combo was not only a successful hail Mary pass, he saw in Walmart more capital than he could ever dream of to scale and finally become a competitive headache for Amazon.

And Walmart did see a jump in online sales, and it continues today. For Jet, one must ask: Did Lore get the capital infusion he needed to further grow the Jet business? If not, did Jet fail to strategize with a solid positioning and marketing plan. Or, did Lore simply fail at the implementation stage?

Trouble in Paradise

As it turns out, the acquisitions of several digital native brands, supposedly to create a long tail model; the opening of the \”incubator\” Store #8; the launch of Jet.com\’s grocery delivery division and the launch of its JetBlack upscale concierge service in New York City were all ill-conceived and are now being shuttered or spun off. Again, it goes back to failing in \”Marketing 101\” — brand positioning. The two brands should have been able to create a successful synergy with the competitive strengths each would bring to the table, as outlined above. This is not said with the benefit of hindsight. Again, it was a strategic failure.

There is further evidence of this huge initial misstep. We now learn from web-traffic firm, SimilarWeb, that Jet.com\’s traffic is plunging. December visits totaled just 1.4 million, tanking 82.5 percent from one year earlier and almost 96 percent from their peak in December of 2016.

Downward Spiral

Last December, I reported even as Walmart\’s e-commerce sales increased by 40 percent last year and its stock price was up 53 percent since acquiring Jet.com compared to a 38 percent increase for the S&P 500, Walmart expected an e-commerce loss of $1 billion in 2019 on sales of about $22 billion. This loss caused internal tensions, political infighting and even pressure from CEO Doug McMillon and the board of directors on Marc Lore, President and CEO of Walmart\’s e-commerce to cut the losses.

What in the world was going on? Well, Marc Lore had this to say, \”Across most of the country, we saw we could get a much higher return on our marketing investments with Walmart.com, so we\’ve dialed up our marketing spend there.\”

Here we go again — back to failing \”Marketing 101\” on day-one of the Jet.com acquisition by Walmart.

Stemming the Losses?

So, now it appears that the deep pockets of Walmart are not Lore\’s for the taking. Plus, he continues to invest against no strategy or a flawed one at best. Or worse, both Lore and McMillon just don\’t know what the strategy should be.

Hence my critique that they both failed in strategic planning, without a sustainable budget plan, weak prior research, flawed action plans and terrible implementation. And with the loss of billions on Lore\’s side of the business, McMillon is now reining everybody in on cost-cutting, selling off Lore\’s brainchildren, but surprisingly keeping Lore in charge of all e-commerce.

Big time question: If Lore is still in charge of Jet.com along with walmart.com, and as quoted, he finds the return on marketing investment to be more robust in walmart.com, what does that mean for Jet.com where the traffic is dropping like the crystal ball in Time\’s Square on New Year\’s Eve? Is this a signal that the two brands will become one – that being walmart.com?

Or is McMillon moving towards sidelining Lore, awakening to the theory that I submitted in my most recent article. As I said, at the end of the day, the good news is that there are super entrepreneurs who are creating a whole new world. The bad news is that they, or their investors, too often don\’t know when to bring in business leadership to instill operational discipline and strategies for long-term profitable growth.

Is this the precise dilemma now confronting Walmart as the investor and Marc Lore as the entrepreneur? Or, should McMillon and the Board give Lore a longer leash? Frankly, I\’m glad it\’s not my decision.

However, as I have stated many times about McMillon\’s epic moves to blow up and transform Walmart\’s old-world model to serve a new-world, tech-armed consumer, he should not buckle or cave into pressures from inside or out. He should stay the course to fulfill his vision, which I still believe is possible. But Doug, please get a strategy.

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