When it comes to development and deployment of advanced technology, organizational decisions often come down to the basic options of either build internally, insuring all nuances are supported or acquire externally.  That is our context of yesterday’s stunning announcement from global based retailer Wal-Mart that it has signed a deal to acquire Amazon rival Jet.com for $3.3 billion.

This deal is being billed as helping to jump-start Wal-Mart’s existing Omni-channel retail strategy including wider deployment and uptake of Wal-Mart.com and many initial signs point exactly to that strategy. Citing data from Dow Jones Venture-Source, The Wall Street Journal reports that this is the largest deal ever paid for a U.S. e-commerce start-up let alone one of the largest acquisitions involving an unprofitable, one-year old start-up. Retail industry readers well know that Wal-Mart has been known for its conservative organizational culture as well as its tendencies to build capabilities to match internal business processes. This week’s announcement is therefore quite significant in its statement of intent.

By immediately announcing that Jet.com’s founder and CEO Marc Lore will now jointly lead both online sites in strategy and future development, CEO Doug McMillan sends a clear message of serious intent to boost online presence and compete directly with Amazon.  However, by our lens, the open question is whether the existing Omni-channel strategy for leveraging Wal-Mart physical and online assets and capabilities will prevail.  The immediate key is the announcement that both sites will remain independent entities but with common leadership and direction. By our lens, that provides the opportunity for a two-phased strategy, Wal-Mart.com leveraging an Omni-channel strategy that leverages global scale of physical and online while Jet.com caters to more upscale shoppers seeking alternatives to amazon and other online retail sites.

Already noted by business and industry media is the distinctively two different corporate cultures represented by both organizations including supply chain and technology expertise. Marc Lore’s intent with Jet.com was to consistently undercut Amazon prices by anywhere from 5-15 percent leveraging pricing software that factors shipping distance and logistics costs in pricing. The stated mission and values of Jet.com are to work collaboratively with retail partners and suppliers and the online provider has been cited by others for its trust and value in people. A similarity to Wal-Mart is in leverage suppliers to hold the burden of inventory ownership and cost, but Jet claims to share the mutual benefits.  Wal-Mart brings considerable resources in physical logistics, distribution and fulfillment center operations along with existing global carrier relationships. The latter will come into play during future holiday buying surges.  Amazon is already well underway in owning its own logistics and parcel transport capabilities for surge periods.

Marc Lore has garnered a reputation as a talented and savvy e-commerce executive. His previous online venture, Quidsi, Inc. operated the successful sites diapers.com and soap.com. That online entity was acquired by Amazon for $550 million in 2010 after Amazon tried unsuccessfully to directly compete. As we see it, Mr. Lore’s new challenge is his abilities to leverage the abilities of one of the globe’s largest retailers in a culture that has not had a consistent track record in deployment of advanced technology.  Readers might recall Wal-Mart’s prior efforts to leverage RFID technology as a competitive advantage. Wal-Mart’s prior track record with acquisitions has been mixed as-well.

As always, time and subsequent events will provide the ultimate determinant for the success of this acquisition. In the meantime, the landscape of B2C e-commerce will be far more interesting and dynamic in the months to come.

Bob Ferrari

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